On the Existence of the Utility Premium for Being Free: or the Rational Irrationality

Several studies in various fields of economic research demonstrated somewhat peculiar results that can not be explained by conventional economic theory. These studies show that if individuals are denied the possibility to commit certain actions either by law, penalty or by any other enforcement mechanism, they are not deterred and in contrast more people violate the law. The authors of these studies propose various explanations, nevertheless, none of them sounds credible. The theory of psychological reactance (Brehm 1966), well known in social psychology, seems to explain all these peculiarities in a very simple manner as it predicts that once the freedom of individuals is threatened, then a form of psychological emotional state arises, which induces people to act to secure their selfdetermination. However, if it is not understand in the context of rationality the theory can not explain why people behave irrationally, when they are prohibited doing so. This is the first attempt to bring the theory of psychological reactance in economics and to document experimentally that people derive utility from having free choice. Moreover, I show that if anything prevents people to act as they will, then they will be happy to act irrationally if this action preserves their freedom. “A free agent is he that can do as he will, and forbear as he will, and that liberty is the absence of external impediments.” T. Hobbes