I tend to agree that anyone who denies the tendency to rationalize is either in denial or has a different definition for the word "rationalize". In fact I would argue that rationalization is the default for human beings, and that anything else requires either focused effort or serious mental re-programming (which is still probably only partially effective).
One possible way to try to elicit an understanding for any given individual's capacity for rationalization is to ask them about the last time they did something they knew was a bad idea (perhaps a comrpomise they felt uncomfortable making, or an indulgence they knew they were going to regret), and then to ask them what excuses went through their brains to justify it. If someone still denies ever having had such an experience then they are beyond redemption.
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I'm not in Seattle, but I read the book recently and would love to hear your "trouble".
Sorry, I didn't respond to this sooner. We actually ended up having a long and by no means conclusive conversation about this.
There's a lot more to it but the two biggest problems I have with Caplan are as follows:
He relies a great deal on separated-at-birth twin studies. These studies tend to include subjects in the dozens, and are prone to a number of mitigating inconsistencies (After all we're not talking about rats here. You can't just engineer the perfect circumstances, and the window of time between science being sufficiently advanced and the intentional separation of twins beginning to be frowned upon is extremely narrow).
He makes the assumption that most (if not all) mental traits are heritable in a linear fashion. For example that alcoholism begets alcoholism. This obviously can and does happen, and the identical replication of certain mental traits may indeed be largely a result of genetics, but it leaves no room for the degree to which a parent's alcoholism may result in gambling, depression, eating disorders, anger issues, or some other drug addiction instead (which I think is more than a little plausible).
I also found Caplan to be extremely glib in general. His arguments had the tone of pronouncements, and the lay-people (to whom the book is marketed) are likely to read that as "These are accepted truths in the scientific community at large" which is decidedly not the case.
Btw, I highly recommend "In the Realm of Hungry Ghosts", Gabor Mate's book about addiction. It's not an exact counterpoint to Caplan's position, but it's definitely a perspective that's based on some very different assumptions.