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The Limits of Rationality

Prevailing economic theory presumes that agents act rationally when they make decisions, striving to maximize the efficient use of their resources. Psychology has repeatedly challenged the rational choice paradigm with persuasive evidence that people do not always make the optimal choice. Yet the paradigm has proven so successful a predictor that its use continues to flourish, fueled by debate across the social sciences over why it works so well.

Intended to introduce novices to rational choice theory, this accessible, interdisciplinary book collects writings by leading researchers. The Limits of Rationality illuminates the rational choice paradigm of social and political behavior itself, identifies its limitations, clarifies the nature of current controversies, and offers suggestions for improving current models.

In the first section of the book, contributors consider the theoretical foundations of rational choice. Models of rational choice play an important role in providing a standard of human action and the bases for constitutional design, but do they also succeed as explanatory models of behavior? Do empirical failures of these explanatory models constitute a telling condemnation of rational choice theory or do they open new avenues of investigation and theorizing?

Emphasizing analyses of norms and institutions, the second and third sections of the book investigate areas in which rational choice theory might be extended in order to provide better models. The contributors evaluate the adequacy of analyses based on neoclassical economics, the potential contributions of game theory and cognitive science, and the consequences for the basic framework when unequal bargaining power and hierarchy are introduced.

272 pages | 6 x 9 | © 1990

Economics and Business: Economics--General Theory and Principles

Political Science: Political and Social Theory

Table of Contents

Introduction: The Limits of Rationality
Margaret Levi, Karen S. Cook, Jodi A. O’Brien, and Howard Faye
Part 1 - The Theory of Rational Choice
1. When Rationality Fails
John Elster
Comment: What Might Rationality Fail to Do?
Geoffrey Brennan
2. Rational Choice and the Framing of Decisions
Amos Tversky and Daniel Kahneman
3. Choice Under Uncertainty: Problems Solved and Unsolved
Mark J. Machina
Comment: Should a Rational Agent Maximize Expected Utility?
John Broome
4. Rational Choice in Experimental Markets
Charles R. Plott
Comment: Individual Decision Making versus Market-Level Predictions: The Applicability of Rational Choice Theory
Karen S. Cook and Jodi A. O’Brien
Part II - Preference Formation and the Role of Norms
5. De Gustibus Non Est Disputandum
George J. Stigler and Gary S. Becker
Comment: De Gustibus Non Est Explanandum
Robert E. Goodin
6. Cooperation and Rationality: Notes on the Collective Action Problem and Its Solutions
Michael Taylor
Comment: On the Inadequacy of Game Theory for the Solution of Real-World Collective Action Problems
Michael Hechter
7. Norm-Generating Structures
James S. Coleman
Comment: An Alternative Approach to the Generation and Maintenance of Norms
Stephen J. Majeski
Part III - Institutions
8. Reason and Rationality
Arthur S. Stinchcombe
Comment: Stinchcombe’s "Reason and Rationality"
Andrew Abbott
9. Managerial Dilemmas: Political Leadership in Hierarchies
Gary J. Miller
Comment: Applying Rational Choice Theory: The Role of Leadership in Team Production
Robert H. Bates and William T. Bianco
10. The Social Evolution of Cooperation
Russell Hardin
Comment: On Russell Hardin’s "The Social Evolution of Cooperation"
Carol A. Heimer
11. Institutions and Their Consequences for Economic Performance
Douglass C. North
12. A Logic of Institutional Change
Margaret Levi
List of Contributors

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