A Reconsideration of the Rationality Postulate: ‘Right Hemisphere Thinking’ in Economics

Edward E. Williams and M. Chapman Findlay

American Journal of Economics and Sociology, 1981, vol. 40, issue 1, 17-36

Abstract: Abstract. The cardinal postulate of neoclassical economics is that individuals and entrepreneurs seek to maximize their unique positions in the world. Yet behind this postulate is an even more fundamental premise: that men are rational and can discern their own best interests. From Adam Smith on, it has been accepted that reasonable men act to maximize their own pecuniary advantage and in most economic models even the potential for irrationality is ignored. Nevertheless, it is becoming increasingly obvious from the research conclusions of other disciplines (psychology, philosophy, political science, and sociology in particular) that the simplistic notion of “economic man,” posited so often in the economics literature, is more fancy than fact. There is an implicit recognition that the neoclassical assumptions may not be correct in the developing area of economic behaviorism. The economic behaviorists, however, adopt a more general definition of rationality, substituting what might be called a “modified rationality postulate” for the global rationality assumed in neoclassical theory. As a result, their conclusions do not differ greatly from those of the neoclassicists. Fortunately, ideas are now crystallizing in psychology which may enable us to shed light on decisions which previously would have had to be classified as non‐rational, irrational, or unexplainable. Some of those ideas are explored.

Date: 1981
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