Four concepts of rationality in economics

Arkadiusz Sieroń

Chapter 1 in Rationality, Psychology and Capitalism, 2026, pp 1-34 from Edward Elgar Publishing

Abstract: Whether people behave rationally is one of the most intriguing subjects of controversy in the social sciences in general and in economics in particular. The aim of this chapter is to contribute to this long-standing debate through detailed examination of different notions of rationality. It distinguishes four types of rationality: (1) a description of the mental processes or reasoning of individuals; (2) a methodological tool, or framework for economical inquiry; (3) a metaphysical statement about human nature; and (4) the empirical proposition that people tend to choose the suitable means to achieve their goals. The chapter argues that only two of these types – methodological and empirical rationality – are crucial for economics, while individual and metaphysical rationality belong to the realm of psychology and philosophy, respectively. The chapter also claims that disagreement among researchers on rationality in economics stems from focusing on different kinds of rationality. In particular, behavioral economists question the rationality assumption in economics, but they conflate rationality as a description of individual behavior with rationality as a methodological device. They commit a straw man fallacy and do not invalidate the rationality principle as a foundational tool for economic inquiry.

Keywords: Behavioral Economics; Homo Economicus; Methodology of Economics; Rationality; Rationality Principle (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035394005
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