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Some Thoughts on the Concept of Rationality in Economic Theory

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  • Panico, Carlo

Abstract

Concept of rationality is crucial in economics. Different notions of rationality have accompanied its long journey, from that implied in classical economics to those proposed by neoclassical theory since 1870s. The paper also discusses the meaning of rationality in rational choice theory, the contributions of Simon on “bounded rationality” and the different lines of research of experimental economics, behavioural economics and neuronomics. During this long journey the literature has underlined the existence of several problems, some of which can be so summarised: is it possible to consider scientifically satisfactory a theory that moves from assumptions, like those on the behaviour of utility, whose validity cannot be empirically verified?, is the description of human psychology implied by the different versions of the neoclassical theory acceptable?, is it possible to overlook the influence of social interactions on individual choice?, is it possible to overlook that it may be not adequate or convenient to examine the working of the whole economic system as the sum of the behaviour of the individual agents? The paper argues that these problems have not yet found a satisfactory solution and that it may be convenient to go back to the contributions of Keynes, Sraffa and Myrdal during the 1920s and 1930s to develop adequate and competent answers.

Suggested Citation

  • Panico, Carlo, 2012. "Some Thoughts on the Concept of Rationality in Economic Theory," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 21(1).
  • Handle: RePEc:sdo:regaec:v:21:y:2012:i:1_bt5
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