Rational choice theory then assumes that an individual has preferences among the available choice alternatives that allow them to state which option they prefer.
These preferences are assumed to be complete (the person can always say which of two alternatives they consider preferable or that neither is preferred to the other) and transitive (if option A is preferred over option B and option B is preferred over option C, then A is preferred over C).
Prior to the publication of Keynes's General Theory, mainstream economic thought held that a state of general equilibrium existed in the economy: because the needs of consumers are always greater than the capacity of the producers to satisfy those needs, everything that is produced will eventually be consumed once the appropriate price is found for it.
This perception is reflected in Say's law which state that individuals produce so that they can either consume what they have manufactured or sell their output so that they can buy someone else's output.
The rational agent is assumed to take account of available information, probabilities of events, and potential costs and benefits in determining preferences, and to act consistently in choosing the self-determined best choice of action.
Rationality is widely used as an assumption of the behavior of individuals in microeconomic models and analyses and appears in almost all economics textbook treatments of human decision-making.
PAUL OYER: Well, in everyday life, we’re always going around making decisions and some of those decisions are very costly.
The theories he'd been teaching in the classroom applied directly to his forays into and JDate.
The interpretations of Keynes that followed are contentious and several schools of economic thought claim his legacy.
Keynesian economists generally argue that, as aggregate demand is volatile and unstable, a market economy will often experience inefficient macroeconomic outcomes.
Gary Becker was an early proponent of applying rational actor models more widely.
The concept of rationality used in rational choice theory is different from the colloquial and most philosophical use of the word.
Using a combination of basic economic principles, demographics, game theory, and number crunching, Jon Birger explains America’s curiously lopsided dating and marriage market among single, college-educated, looking-for-a-partner women.