Rational choice theory assumes human behavior is guided by instrumental reason. Accordingly, individuals always choose what they believe to be the best means to achieve their given ends. Thus, they are normally regarded as maximizing utility, the "currency" for everything they cherish (for example: money, a long life, moral standards). As the modern formulation of much older descriptions of rational behavior, Rational choice theory belongs to the foundational theory of economics. Over the last decades it has also become increasingly prevalent in other social sciences. Face-to-face trading interactions on the New York Stock Exchange trading floor Look up economics in Wiktionary, the free dictionary. ... The social sciences are groups of academic disciplines that study the human aspects of the world. ...

Rational choice theory adopts methodological individualism; it conceives of social situations or collective behaviors as the exclusive result of individual actions. However, rational choice theory is not only applied to individual human actors. Often, the same pursuit of cherished values is assumed for collective entities, for example corporations or national governments.

For a choice to be described as "rational", a number of assumptions are ordinarily stated:

• In economics, the key concept is preference: a preference ranking for a set of items is described as rational if preferences are:

 1) complete (all items from the choice set can be ranked from lower to higher) 2) transitive (if A is preferred to B, and B to C, then A is preferred to C). 

Thus, the decision-maker is able to compare all of the alternatives, and all comparisons are consistent. Preference (or taste) is a concept, used in the social sciences, particularly economics. ...

• If uncertainty is involved, then the independence axiom is often assumed in addition to rational preferences.
• If decision-making over time is involved, time consistency is generally assumed as well.
• Finally, the rational decision-maker must always choose the item he or she prefers.

Often, to simplify calculation and ease prediction, some rather unrealistic assumptions are made about the world. These can include: Independence of irrelevant alternatives (IIA) is an axiom often adopted by social scientists as a basic condition of rationality. ... A pocket watch, a device used to keep time There are two distinct views on the meaning of time. ... In economics, dynamic inconsistency, or time inconsistency, describes a situation where a decision-makers preferences change over time, such that what is preferred at one point in time is inconsistent with what is preferred at another point in time. ... A calculation is a deliberate process for transforming one or more inputs into one or more results. ... A prediction or forecast is a statement or claim that a particular event will occur in the future. ... Look up assumption in Wiktionary, the free dictionary. ... Antarctica Oceania Africa Asia Europe North America South America Middle East Caribbean Central Asia East Asia North Asia South Asia Southeast Asia SW. Asia Australasia Melanesia Micronesia Polynesia Central America Latin America Northern America Americas C. Africa E. Africa N. Africa Southern Africa W. Africa C. Europe E. Europe N...

• An individual has precise information about exactly what will occur under any choice made. (Alternatively, an individual has a reliable probability distribution describing what will happen under any choice made.)
• An individual has the cognitive ability to weigh every choice against every other choice.
• An individual is aware of all possible choices.

Sometimes these assumptions have the status of "as if" propositions—statements that are not meant to be literally true but that predict the behaviors individuals are believed to exhibit. Information is the result of processing, manipulating and organizing data in a way that adds to the knowledge of the person receiving it. ... In mathematics and statistics, a probability distribution, more properly called a probability density, assigns to every interval of the real numbers a probability, so that the probability axioms are satisfied. ...

Both the assumptions and the behavioral predictions of ""rational choice theory"" have sparked criticism from a number of camps. Some people have developed models of bounded rationality, which hope to be more psychologically plausible without completely abandoning the idea that reason underlies decision-making processes. For a long time, a popular strain of critique was a lack of empirical basis, but experimental economics and experimental game theory have largely changed that critique (although they have added other critiques, mainly by demonstrating some human behavior that consistently deviates from rational choice theory). Early critiques of the rational choice approach in political science for example, argued that the rational choice theorists could not explain why people voted, much less make more sophisticated arguments about political behavior. Many models of human behavior in the social sciences assume that humans can be reasonably approximated or described as rational entities, especially as conceived by rational choice theory. ... Psychology is an academic and applied discipline involving the scientific study of mental processes and behavior. ... It has been suggested that reasoning be merged into this article or section. ... Experimental economics is the use of experimental methods to evaluate theoretical predictions of economic behaviour. ... Game theory is most often described as a branch of applied mathematics and economics that studies situations where players choose different actions in an attempt to maximize their returns. ... The paradox of voting, also referred to as Downs paradox is a reference to the fact that for a rational, self-interested voter, the costs of voting will normally exceed the expected benefits. ...

Rational choice has had far-reaching impacts on the study of political science, especailly in fields like the study of interest groups, elections, behaviour in legislatures, coalitions, and bureaucracy (see Dunleavy, 1991). Political science is the field of the social sciences concerning the theory and practice of politics and the description and analysis of political systems and political behavior. ... This page is about the sociological concept. ...

Why rational choice theory?

One question that can be asked is why people try to base their models on concepts such as "reason", "preferences", and what is implied by them, free will. Some potential reasons: a) They see people as "rational" beings, and thus believe that a model in which they are represented as such should be reasonably accurate; b) Assumptions of rationality have useful formal properties; c) The individualistic methodology and the mathematical formalization of rational choice behavior allow for an easier understanding of complex social phenomena. Preference (or taste) is a concept, used in the social sciences, particularly economics. ... Free will is the philosophical doctrine that holds that our choices are ultimately up to ourselves. ... In ontology, a being is anything that can be said to be, either transcendantly or immanently. ...

See also

• Bureaucracy
• Framing (economics)
• Homo economicus
• Neoclassical economics
• Organizational theory
• Positive political theory
• Public choice theory
• Rational expectations
• Social choice theory
• James S. Coleman
• Rational ignorance
• Rational pricing
• Rationality

This page is about the sociological concept. ... In economics, framing means the manner in which a rational choice problem has been presented. ... Homo economicus, or Economic man, is the concept in some economic theories of man as both rational and It is a term used for an approximation or model of Homo sapiens that acts to obtain the highest possible well-being for himself given available information about opportunities and other constraints... Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ... Organizational Studies (also known as Industrial Organizations, Organizational Behavior and I/O) is a distinct field of academic study which takes as its subject organizations, examining them using the methods of economics, sociology, political science, anthropology, and psychology. ... Positive political theory or explanatory political theory is the study of politics using formal methods such as set theory, statistical analysis, and game theory. ... Public choice theory is a branch of economics that studies the decision-making behavior of voters, politicians and government officials from the perspective of economic theory, namely game theory and decision theory. ... Rational expectations is a theory in economics originally proposed by John F. Muth (1961) and later developed by Robert E. Lucas Jr. ... Social choice theory studies how individual preferences are aggregated to form a collective preference. ... James S. Coleman, born May 12, 1926 in Bedford, Indiana, died March 25, 1995 in Chicago, was an American sociologist. ... Rational ignorance is a term most often found in economics, particularly public choice theory, but also used in other disciplines which study rationality and choice, including philosophy (epistemology) and game theory. ... Rational pricing is the assumption in financial economics that asset prices (and hence asset pricing models) will reflect the arbitrage-free price of the asset as any deviation from this price will be arbitraged away. This assumption is useful in pricing fixed income securities, particularly bonds, and is fundamental to... To meet Wikipedias quality standards, this article or section may require cleanup. ...

References

• Amartya Sen (1987), “Rational behaviour," The New Palgrave: A Dictionary of Economics, v. 3, pp. 68-76.
• Kenneth J. Arrow, 1987, “Economic theory and the hypothesis of rationility," The New Palgrave: A Dictionary of Economics, v. 2, pp. 69-75.
• Patrick Dunleavy "Democracy, Bureaucracy and Public Choice: Economic Models in Political Science" (London: Pearson, 1991, reissued 2001).

Amartya Sen Amartya Kumar Sen CH (Hon) (Bengali: Ômorto Kumar Shen) (born 3 November 1933 in Santiniketan, India), is an Indian philosopher, economist and a winner of the Bank of Sweden Prize in Economic Sciences (Nobel Prize for Economics) in 1998, for his work on famine, human development theory, welfare... Kenneth Arrow Kenneth Joseph Arrow (born August 23, 1921) is an American economist, winner of the Bank of Sweden Prize in Economic Sciences in 1972. ... Image:Dunleavy4. ...

External links

• Rational Choice Theory - Article by John Scott