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Choice and Action

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  • Lane, David, et al

Abstract

In this essay, we argue that the rational choice (RC) provides an inadequate foundation for a theory of economic action. After defining RC sufficiently broadly to encompass much of the bounded rationality literature as well as neoclassical optimization theory, we present three principal arguments against RC. The first is cognitive: economic actors are experts at what they do, and the cognitive processes that underlie expertise are not consistent with RC, descriptively, prescriptively or positively. The second argument begins with the observation that economic action takes place in and through relationships between agents, and these relationships may generate actions that cannot be localized to individual agents. We argue that these generative relationships are essential to understanding such fundamental economic phenomena as innovation, and the actions that result from them are not amenable to analysis from a RC perspective. Finally, we argue that most economic agents lack the judgment and execution coherence required by RC. In a companion paper, we propose an alternative foundation for a theory of economic action that builds on the critique of RC presented in this paper.

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Bibliographic Info

Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 6 (1996)
Issue (Month): 1 (February)
Pages: 43-76

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Handle: RePEc:spr:joevec:v:6:y:1996:i:1:p:43-76

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Cited by:
  1. Massimo Riccaboni & Maria Laura Frigotto, 2011. "A Few Special Cases: Scientific Creativity and Network Dynamics in the Field of Rare Diseases," DISA Working Papers 2011/03, Department of Computer and Management Sciences, University of Trento, Italy, revised 24 May 2011.
  2. Oliver Budzinski, 2003. "Cognitive Rules, Institutions, and Competition," Constitutional Political Economy, Springer, vol. 14(3), pages 213-233, September.
  3. Tony Fu-Lai Yu, 2003. "A subjectivist approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 335-345.
  4. John Finch & Nicola Dinnei, 2001. "Capturing Knightian Advantages of Large Business Organisations Through Group Decision-making Processes," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 379-403.
  5. Félix-Fernando Muñoz & María-Isabel Encinar, 2014. "Intentionality and the emergence of complexity: an analytical approach," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 317-334, April.
  6. Guido Fioretti, 2002. "A Model of Primary and Secondary Waves in Investment Cycles," Microeconomics 0207014, EconWPA.
  7. Nicolai J. Foss, 1996. "Thorstein B. Veblen Precursor of the Competence-Based Approach to the Firm," DRUID Working Papers 96-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  8. Frederic Lee & Steve Keen, 2004. "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory," Review of Social Economy, Taylor & Francis Journals, vol. 62(2), pages 169-199.
  9. Mauro Caminati, 2012. "Self sustaining R&D networks," Department of Economics University of Siena 653, Department of Economics, University of Siena.
  10. David Lane & Robert Maxfield, 1995. "Foresight, Complexity, and Strategy," Working Papers 95-12-106, Santa Fe Institute.
  11. Hodgson, Geoffrey M., 2004. "Reclaiming habit for institutional economics," Journal of Economic Psychology, Elsevier, vol. 25(5), pages 651-660, October.
  12. Russo, Margherita & Rossi, Federica, 2008. "Cooperation networks and innovation: A complex system perspective to the analysis and evaluation of a EU regional innovation policy programme," MPRA Paper 10156, University Library of Munich, Germany.
  13. Brian Loasby, 1999. "Making Connections - A Review of Neil M. Kay, Pattern in Corporate Evolution," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(3), pages 439-452.
  14. Mouck, Tom, 2000. "Beyond Panglossian theory: strategic capital investing in a complex adaptive world," Accounting, Organizations and Society, Elsevier, vol. 25(3), pages 261-283, April.
  15. Jintong Tang, 2010. "How entrepreneurs discover opportunities in China: An institutional view," Asia Pacific Journal of Management, Springer, vol. 27(3), pages 461-479, September.

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