The economic rationality assumption essay

Both the definition and the precise domain of economics are subjects of controversy within philosophy of economics. At first glance, the difficulties in defining economics may not appear serious.

The economic rationality assumption essay

Max Weber[ edit ] The German sociologist Max Weber proposed an interpretation of social action that distinguished between four different idealized types The economic rationality assumption essay rationality.

These expectations serve as means for a particular actor to attain ends, ends which Weber noted were "rationally pursued and calculated. Here the action is undertaken for what one might call reasons intrinsic to the actor: Weber emphasized that it was very unusual to find only one of these orientations: His usage also makes clear that he considered the first two as more significant than the others, and it is arguable that the third and fourth are subtypes of the first two.

Instead, Weber suggests that a ground or motive can be given—for religious or affect reasons, for example—that may meet the criterion of explanation or justification even if it is not an explanation that fits the Zweckrational orientation of means and ends.

The opposite is therefore also true: Psychology[ edit ] In the psychology of reasoningpsychologists and cognitive scientists have defended different positions on human rationality. Byrne among others is that humans are rational in principle but they err in practice, that is, humans have the competence to be rational but their performance is limited by various factors.

Behavioral Economics: Still Too Devoted To Homo Economicus? - Economic Questions

This has led to disputes in psychology over whether researchers should only use standard rules of logic, probability theory and statistics, or rational choice theory as norms of good reasoning. Opponents of this view, such as Gerd Gigerenzerfavor a conception of bounded rationalityespecially for tasks under high uncertainty.

The purpose, or function, of ascribing rationality: The subject of rationality: What, or who, is rational: What is the quality of the cognitive decision-making process: Is rationality merely instrumental, that is, agnostic about the logic of human action and its motivations instrumental rationality or does it substantially inform them substantive rationality, focusing on material maximization?

Grayling that a good rationale must be independent of emotions, personal feelings or any kind of instincts. Any process of evaluation or analysis, that may be called rational, is expected to be highly objective, logical and "mechanical".

If these minimum requirements are not satisfied i. Modern cognitive science and neuroscience show that studying the role of emotion in mental function including topics ranging from flashes of scientific insight to making future plansthat no human has ever satisfied this criterion, except perhaps a person with no affective feelings, for example an individual with a massively damaged amygdala or severe psychopathy.

Thus, such an idealized form of rationality is best exemplified by computers, and not people. However, scholars may productively appeal to the idealization as a point of reference. The distinction is also described as that between epistemic rationality, the attempt to form beliefs in an unbiased manner, and instrumental rationality.

Theoretical rationality has a formal component that reduces to logical consistency and a material component that reduces to empirical support, relying on our inborn mechanisms of signal detection and interpretation.

Statements

Examples in different fields[ edit ] Main article: Logic and rationality As the study of arguments that are correct in virtue of their form, logic is of fundamental importance in the study of rationality. The study of rationality in logic is more concerned with epistemic rationality, that is, attaining beliefs in a rational manner, than instrumental rationality.

Economics[ edit ] Rationality plays a key role and there are several strands to this. Secondly, there is an axiomatic concept that rationality is a matter of being logically consistent within your preferences and beliefs.

Introduction

Debates within economic sociology also arise as to whether or not people or organizations are "really" rational, as well as whether it makes sense to model them as such in formal models.

Some have argued that a kind of bounded rationality makes more sense for such models. Others think that any kind of rationality along the lines of rational choice theory is a useless concept for understanding human behavior; the term homo economicus economic man: Behavioral economics aims to account for economic actors as they actually are, allowing for psychological biases, rather than assuming idealized instrumental rationality.

Artificial intelligence[ edit ] Within artificial intelligencea rational agent is typically one that maximizes its expected utilitygiven its current knowledge. Utility is the usefulness of the consequences of its actions.

The utility function is arbitrarily defined by the designer, but should be a function of "performance", which is the directly measurable consequences, such as winning or losing money. In order to make a safe agent that plays defensively, a nonlinear function of performance is often desired, so that the reward for winning is lower than the punishment for losing.

An agent might be rational within its own problem area, but finding the rational decision for arbitrarily complex problems is not practically possible. The rationality of human thought is a key problem in the psychology of reasoning.

Some scholars hold it indispensable. He further argues that when it comes to concrete security and foreign policies, IR employment of rationality borders on "malpractice":Proposed by the US Nobel-laureate economist Herbert Simon () in his book 'Models Of Bounded Rationality And Other Topics In Economics.'Compare with perfect rationality.

The assumption of economic rationality does not carry any moral or ethical implication. Rationality implies that in a period of acute shortage, producers and distributors would raise the price and secure higher profit margins.

Such a behavior may be condemned from the social point of view, but economically it is justified. Essay on Basic.

The economic rationality assumption essay

The initial question regarding the economic rationality of bad health choices draws on personal knowledge from prior research regarding traditional economic circumstance of Aboriginal and Torres Strait Islander people [7,8,9] and multidisciplinary research in addressing chronic disease among Aboriginal people in remote Australia [10,11,12,13].

The assumption of rationality or purposive behavior central to realism (like the ‘‘bounded rationality’’ claims of institutionalism) implies action on the basis of a .

Radical punishment: the economic rationality of the Marquis de Sade – Philosophers for Change

Problems arise however, with the implicit assumption of rationality in models involving human behaviour in varied situations. Rationality implies comprehensive knowledge of the current economic system, which is then factored into the decision making process.

Explain, in your own words, the rationality assumption, and contrast it with the assumption of 1. Explain, in your own words, the rationality assumption, and contrast it with the assumption of bounded rationality proposed by adherents of behavioral economics.

Rational choice theory - Wikipedia