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Rational choice theory, also known as '''rational action theory''', is a Hypothesis , a Paradigm , one of Framework s for understanding and often Formally Modeling social and economic behavior. It is the dominant theoretical Paradigm in Microeconomics . It is also central to modern Political Science and is used by scholars in other disciplines such as Sociology . The 'rationality' described by rational choice theory is different from colloquial and most philosophical uses of rationality. Models of rational choice are very diverse but they share one thing in common. They all Assume that individuals choose the best action according to stable preference functions and constraints facing them. Most models have additional assumptions. Proponents of rational choice models do not claim that a model's assumptions are a full description of reality, only that good models can aid reasoning and provide help in formulating falsifiable hypotheses, whether intuitive or not. Successful hypotheses are those that survive empirical tests. Rational choice theory is a successor of much older descriptions of rational behavior. It is widely used as an assumption of the behavior of individuals in , especially in fields like the study of interest groups, elections, behaviour in legislatures, coalitions, and Bureaucracy (Dunleavy, 1991). Models that rely on rational choice theory often adopt Methodological Individualism , the assumption that social situations or collective behaviors are the result of individual actions. ACTIONS, ASSUMPTIONS, AND INDIVIDUAL PREFERENCES Rational decision making entails choosing an action given one's preferences, the actions one could take, and expectations about the outcomes of those actions. Actions are often expressed as a set, for example a set of ''j'' Exhaustive and Exclusive actions: : For example, if a person is to vote for either Roger, Sara, or abstain, her set of possible voting actions is: : Individuals can also have similar sets of possible outcomes. Rational choice theory makes two assumptions about individuals' preferences for actions. First, is the assumption of completeness, that is that all actions can be ranked in an order of preference (indifference between two or more is possible). Second, is the ''' Transitivity ''', the assumption that if action ''a1'' is preferred to ''a2'', and action ''a2'' is preferred to ''a3'', then ''a1'' is preferred to a3. Together these assumptions form the result that given a set of exhaustive and exclusive actions to chose from, an individual can rank them in terms of her preferences, and that her preferences are consistent. An individual's preferences can also take forms:
In more complex models, other assumptions are often incorporated, such as the assumption of Independence Axiom . Also, with Dynamic Models that include decision-making over Time , Time Inconsistency may affect an individual's preferences. Other Assumptions Often, to simplify Calculation and facilitate testing, some possibly unrealistic Assumption s are made about the World . These can include:
UTILITY MAXIMIZATION Often preferences are described by their Utility function or ''payoff function''. This is an ordinal number an individual assigns over the available actions, such as: : The individual's preferences are then expressed as the relation between these ordinal assignments. For example, if an individual prefers the candidate Sara over Roger over abstaining, their preferences would have the relation: : CRITICISM Both the assumptions and the behavioral predictions of rational choice theory have sparked criticism from various camps. Some people have developed models of Bounded Rationality , which hope to be more Psychologically plausible without completely abandoning the idea that Reason underlies decision-making processes. For a long time, a popular strain of critique was a lack of empirical basis, but Experimental Economics and Experimental Game Theory have largely changed that critique (although they have added other critiques, mainly by demonstrating some human behavior that consistently deviates from rational choice theory). In their 1994 piece, Pathologies of Rational Choice Theory, Green and Shapiro argue that the empirical outputs of rational choice theory have been limited. They contend that much of the applicable literature, at least in Political Science, was done with weak methods and that when corrected many of the empirical outcomes no longer hold. When taken in this perspective, Rational Choice Theory has provided very little to the overall understanding of political interaction - and is an amount certainly disproportionately weak relative to its appearance in the literature (Green and Shapiro, 1994). BENEFITS OF RATIONAL CHOICE THEORY Describing the decisions made by individuals as rational and utility maximizing may seem to be a Tautological explanation of their behavior that provided very little new information. While there may be many reasons for a rational choice theory approach, two are important for the social sciences. First, assuming humans make decisions in a rational, rather than Stochastic manner implies that their behavior can be modeled and thus predictions can be made about future actions. Second, the mathematical formality of rational choice theory models allows social scientists to derive results from their models that may have otherwise not been seen. SEE ALSO
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