On the Limits of Rational Choice Theory
The value of rational choice theory for the social sciences has long been contested. It is argued here that, in the debate over its role, it is necessary to distinguish between claims that people maximise manifest payoffs, and claims that people maximise their utility. The former version has been falsified. The latter is unfalsifiable, because utility cannot be observed. In principle, utility maximisation can be adapted to fit any form of behaviour, including the behaviour of non-human organisms. Allegedly 'inconsistent' behaviour is also impossible to establish without qualification. This utility-maximising version of rational choice theory has the character of a universal 'explanation' that can be made to 'fit' any set of events. This is a sign of weakness rather than strength. In its excessive quest for generality, utility-maximising rational choice theory fails to focus on the historically and geographically specific features of socio-economic systems. As long as such theory is confined to ahistorical generalities, then it will remain highly limited in dealing with the real world. Instead we have to consider the real social and psychological determinants of human behaviour.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Downward & Andrew Mearman, 2008. "Decision-making at the Bank of England: a critical appraisal," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 385-409, July.
- Smith, Adam, 1759. "The Theory of Moral Sentiments," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1759.
- Dow Alexander & Dow Sheila C., 2011. "Animal Spirits Revisited," Capitalism and Society, De Gruyter, vol. 6(2), pages 1-25, December.
- Rutherford,Malcolm, 1996.
"Institutions in Economics,"
Cambridge University Press, number 9780521574471, October.
- Rutherford,Malcolm, 1994. "Institutions in Economics," Cambridge Books, Cambridge University Press, number 9780521451895, October.
- Victoria Chick, 2008. "Could the Crisis at Northern Rock have been Predicted?: An Evolutionary Approach-super- 1," Contributions to Political Economy, Oxford University Press, vol. 27(1), pages 115-124.
- S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
- Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
- S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
- Stefano DellaVigna, 2007. "Psychology and Economics: Evidence from the Field," NBER Working Papers 13420, National Bureau of Economic Research, Inc.
- Nava Ashraf & Colin F. Camerer & George Loewenstein, 2005. "Adam Smith, Behavioral Economist," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 131-145, Summer.
- Sheila Dow, 2004. "Structured pluralism," Journal of Economic Methodology, Taylor & Francis Journals, vol. 11(3), pages 275-290.
- Tony Lawson, 2009. "The current economic crisis: its nature and the course of academic economics," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 759-777, July.
- Dow, Sheila C, 1990. "Beyond Dualism," Cambridge Journal of Economics, Oxford University Press, vol. 14(2), pages 143-157, June.
- Esther-Mirjam Sent, 2004. "Behavioral Economics: How Psychology Made Its (Limited) Way Back Into Economics," History of Political Economy, Duke University Press, vol. 36(4), pages 735-760, Winter.
- Chick, Victoria & Dow, Sheila C, 2001. "Formalism, Logic and Reality: A Keynesian Analysis," Cambridge Journal of Economics, Oxford University Press, vol. 25(6), pages 705-721, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wea:econth:v:1:y:2012:i:1:p:5. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jake McMurchie)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.