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Rationality

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The New Palgrave Dictionary of Economics

Abstract

Economic theory takes the individual consumer and firm as a primitive unit of analysis, and so a theory of individual agency is required to derive hypotheses about the behaviour of markets and other systems of economic interest. One such theory is the principle of rationality, whereby agents act in their perceived best interest. This article surveys the implementation of this principle in economic models, and discusses the critiques of the rationality principle and some proposed alternatives from the perspective of the economic modeller.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Lawrence E. Blume & David Easley

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  1. Lawrence E. Blume
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  2. David Easley
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    Blume, L.E., Easley, D. (2008). Rationality. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_2138-1

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    • DOI: https://doi.org/10.1057/978-1-349-95121-5_2138-1

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    • Online ISBN: 978-1-349-95121-5

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