Theoretical Concepts of Economic Rationality

Abstract

Economists are so attached to the idea of economics as a body of knowledge concerning the best possible use of available resources that the concept of rationality seems a sacrosanct cornerstone on which the whole structure rests. But, on close scrutiny, this concept — and its meaning for economics — becomes much less clear. What makes things difficult is probably the fact that the understanding of the role of rationality in economic activity has been undergoing continuous evolution. Two hundred years ago it was possible to assume that man by his very nature acted rationally in his economic life. This assumption eventually became obsolete. Today, it may at best be claimed that, amidst various obstacles and difficulties, man only endeavours (or, perhaps, should endeavour) to act rationally. There is a vast difference between these two assumptions. The first gave birth to an interpretative body of theory, claiming to explain what is. The second may give rise only to theories describing what should be, given additional assumptions on what is desirable.