Rationality is a way to choose the best solution

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45

Rationality is a rather complicated concept from the standpoint of scientific analysis. However, when viewed from the point of view of simple consciousness, one might think that it is very light.

Definition

Rationality is a certain algorithm of actions, during the execution of which the subject will not choose one alternative if another alternative is available to him at the same time, which he recognizes as preferable. According to Hayek's theory, rational behavior should be aimed at obtaining a specific result. At the same time, it should be noted that rationality is the normal behavior of people, which can be studied in terms of determining the norm of reality in the economy.

Basic forms of rational behavior

So, in economic theory, the following main types of rational behavior are distinguished: following certain personal interests and direct rationality.

Let's take a closer look at these forms. Thus, economic rationality is considered in the form of three main forms:

• Maximization involvingselection of the best option from all existing alternatives. This principle is the basis of the neoclassical theory, in which the economic entity is represented by certain functions, and consumers - by the distribution of resources between certain economic spheres. At the same time, optimization should be traced at all stages of rationality reproduction.
• Bounded rationality is a premise accepted in economic theory in the form of transaction costs. This form implies the desire of economic entities to act rationally, but in practice it has this ability to a limited extent.
• Organic rationality has found its way into the theories of Nelson, Winter and Alchian in tracing the evolutionary process within both single and multiple businesses.

The last two forms of rationality harmoniously complement each other. However, they are used to achieve different goals. The study of their institutions is necessary for the implementation of the method of reducing transaction costs by the followers of the neoclassical theory, but the representatives of the Austrian School are widely used in ascertaining the viability of their institutions.

Rationality in the economic sphere

Rationality in the economy through human actions is regulated not only by a specific calculation. Some events and actions can be performed under the influence of personal values, feelings and other manifestations of the psyche.

From the side of an external observer, one or anotherhuman actions can be perceived and judged as irrational and illogical.

The founders of economic theory noted that in the economic life of mankind there are factors that often encourage irrational actions. For example, A. Smith substantiated the law of the exchange of the results of labor between certain producers, as well as between the consumer and the producer, the buyer and the seller. In a theory known as the "theory of labor value" he proposed the equivalent of the price - the time spent on the production of goods. At the same time, scientists recognized the fact that, simultaneously with the objectively spent time, there is another, subjective value of the goods for the buyer and the manufacturer.