Economic Rationality

The term rationality in common usage means “being reasonable,” with the use of reason based on facts usually applied to a context of active behavior involving choice. However, rationality has special meanings in different disciplines, often associated with notions of optimality in reaching a goal or resolving a problem. In economics [Page 605]specifically, the term is used in diverse settings with different meanings, often associated with self-interest and maximization of some magnitude against a set of constraints. Oskar R. Lange even linked rationality to maximization, according to Kurt W. Rothschild. A rational process is thought to be objective and logically derived from an experiential base. In recent years, economists’ theory of rationality has been challenged by experimental evidence from behavioral economics, which Michael J. Piore ...