The Concept of Minimal Rationality

Abstract

For a long time economists have felt that the idealization of rationality for modeling purposes needed theoretical justification. The first evolutionary arguments for rationality appeared during the 1930’s in the works of Schumpeter [382] or in the famous marginalism controversy by Harrod [171] who compared new business procedures to “mutations in nature”. Alchian [3] later claimed that competition will lead to a survival of firms with positive profits, whether or not they consciously maximize them or not.¹

A discussion of the marginalist controversy can be found in [310]. Evolutionary ideas in economics, however, can be traced back even further than this. Hodgson [180] gives a comprehensive account of the history of evolutionary thought in economics.