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10 Theories - Rational Choice Theory
Rational choice theory, also known as choice theory or rational action theory, is a framework for understanding and often formally modeling social and economic behaviour. Rationality, interpreted as "wanting more rather than less of a good", is widely used as an assumption of the behavior of individuals in microeconomic models and analysis and appears in almost all economics textbook treatments of human decision-making. It is also central to some of modern political science, sociology, and philosophy. It attaches "wanting more" to instrumental rationality, which involves seeking the most cost-effective means to achieve a specific goal without reflecting on the worthiness of that goal. Gary Becker was an early proponent of applying rational actor models more widely. He won the 1992 Nobel Memorial Prize in Economic Sciences for his studies of discrimination, crime, and human capital.
The "rationality" described by rational choice theory is different from the colloquial and most philosophical use of the word. For most people, "rationality" means "sane," "in a thoughtful clear-headed manner," or knowing and doing what's healthy in the long term.
Rational choice theory uses a specific and narrower definition of "rationality" simply to mean that an individual acts as if balancing costs against benefits to arrive at action that maximizes personal advantage. For example, this may involve kissing someone, cheating on a test, buying a new dress, or committing murder rather than the catallactic information many people may primarily think of as economics. Rational choice theory is closely linked with methodological individualism and subjective value theory most associated with Ludwig Von Mises' Human Action and the classical science developed by Spanish, Italian, and French economists.
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