Economic Rationality

Daniel E. Palmer

Economic rationality refers to the conception or conceptions of rationality commonly found and used in economic theory. While there is no single notion of rationality appealed to by all economic theories, there is a core conception of rationality that forms the basis of much economic theorizing. This view of rationality, termed the neoclassical conception of economic rationality, takes rationality to consist largely of the maximization of subjective utility. While it has sometimes been assumed that subjective utility is equivalent to self-interest, these notions are not identical. The notion of subjective utility allows that an agent might have preferences or desires that are not purely self-interested. This view can be taken as either a normative account of how rational agents ought to act or a methodological assumption used by economists to study and predict the economic behavior of individuals. In either case, it is not meant as a purely descriptive account, ...

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