Rationality Is More Convincing Than The Economic Interpretation

1419 Words Dec 6th, 2016 6 Pages
Rationality is a term that most people understand as making sensible decisions and choices based on facts and the amount information someone possess in a particular situation. However, in the world of economics and psychology this term can be assumed in two different contrasts. In economics, rationality can be defined as individuals making decisions based on their self-interest as well as maximising their utility. This is also mentioned by Edgeworth (1881 p.16) where he states ‘the first principle of Economics is that every agent is actuated only by self-interest’. Whereas in psychology, rationality is understood as making quick decisions that will suffice based on conscious thought processes. Both of these areas of social science interpret the term rationality in two very distinct ways and can be argued that one is more convincing than the other to some extent. In my opinion, the psychological interpretation of rationality is more convincing than the economic interpretation to a certain degree.
In economics, there are multiple theories that focus on rationality. One common theory that is used by most economist is Rational Choice Theory. Rational Choice Theory is a belief that states that individual 's will always make logical and rational decisions. These decisions provide people with the greatest benefit and are performed in an individual 's own self-interest. It also assumes that all individuals try to actively maximize their gain in any situation and therefore…

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