Abstract:
It seems easy to accept that rationality involves many features that cannot be summarized in terms of some straightforward formula, such as binary consistency. However, this recognition does not immediately lead to alternative characterizations that might be regarded as satisfactory, even though the inadequacies of the traditional assumptions of rational behavior standard used in economic theory have become hard to deny. It will not be an easy task to find replacements for the standard assumptions of rational behavior ... that can be found in the traditional economic literature, both because the identified deficiencies have been seen as calling for rather divergent remedies, and also because there is little hope of finding an alternative assumption structure that will be as simple and usable as the traditional assumptions of self-interest maximization, or of consistency of choice.
Machine summary:
"This spread of the rational choice approach beyond conventional economic issues is discussed by Becker (1976), Radnitzky and Bernholz (1987), Hogarth and Reder (1987), Swedberg (1990), and Green and Shapiro (1996).
2. Basic Assumptions about Choice Determination Rational Choice Theory generally begins with consideration of the choice behavior of one or more individual decision-making units – which in basic economics are most often consumers and/or firms.
A rational choice analysis of the market for fresh tomatoes, for example, would generally involve a description of (i) the desired purchases of tomatoes by buyers, (ii) the desired production and sales of tomatoes by sellers, and (iii) how these desired purchases and desired sales interact to determine the price and quantity sold of tomatoes in the market.
The use of utility functions means the idea of agents making the preferred choices from among available alternatives is translated into a mathematical exercise in constrained optimization.
Fifth and last, in the absence of strong reasons to do otherwise such as the imposition of price controls by the government, the analyst employing rational choice theory will generally assume that equilibrium outcomes in the model are adequate representations of what actually happens in the real world.
" In any case, dynamic models with positive time preference are pervasive in the rational choice literature.
(3) Determine the "decision rules" of each agent, which characterize how an agent’s choices respond to changes of one kind or another – for example, how the quantity of tomatoes purchased, might change with price or income."