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Constant or Variable Rationality As an Assumption of Economic Theory

Author

Listed:
  • Avtonomov, V.

    (National Research University Higher School of Economics, Moscow, Russia
    Primakov's Institute of World Economy and International Relations, Russian Academy of Sciences, Moscow, Russia)

Abstract

The article deals with evolution of rationality assumption as component of the model of man in economic science. In classical political economy this assumption didn't play the key role separating the scope of economic science - this role was performed by the assumption of self-interest. The rationality assumption became important as a result of the Marginal revolution and began to be an object of special research only in the context of expected utility maximization hypothesis of von Neuman and Morgenstern. These developments made it remote from everyday human behavior. In order to make economics a bit more realistic various strategies are used which are briefly surveyed. Within the constant rationality approach we could choose a model of a representative agent characterized by full or bounded rationality. Within the variable rationality approach an additional economic agent may be introduced who will be responsible for observed deviations from rational behaviour, while all the other agents could be described by the familiar rational model. The second variant consists in splitting the economic agent into different subpersonalities, having different, and moreover, conflicting goals. Still another option is to make rationality not only variable but also continuous. In this case it is possible to reach the optimal rationality which differs from the maximum one.

Suggested Citation

  • Avtonomov, V., 2017. "Constant or Variable Rationality As an Assumption of Economic Theory," Journal of the New Economic Association, New Economic Association, vol. 33(1), pages 142-146.
    • Handle: RePEc:nea:journl:y:2017:i:33:p:142-146
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    File URL: http://www.econorus.org/repec/journl/2017-33-142-146.pdf
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    References listed on IDEAS

    as
    1. George J. Stigler, 1971. "Smith's Travels on the Ship of State," History of Political Economy, Duke University Press, vol. 3(2), pages 265-277, Fall.
    2. Arrow, Kenneth J, 1986. "Rationality of Self and Others in an Economic System," The Journal of Business, University of Chicago Press, vol. 59(4), pages 385-399, October.
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    Cited by:

    1. Galeev, A., 2022. "Proto-marginalist approach in Russia: Yuli Zhukovsky's interpretation of Ricardo," Journal of the New Economic Association, New Economic Association, vol. 55(3), pages 177-191.

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    More about this item

    Keywords

    rationality; model of man; classical political economy; marginal revolution; behavioral economics;
    All these keywords.

    JEL classification:

    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches

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