A Discussion Of Rational Choice Theory Essay

, Research Paper

Rational Choice Theory is perhaps one of the best known methodological approaches to the explanation of individual action. In this essay I hope to outline Rational Choice Theory and discuss certain areas of weakness in this theory, where its explanatory powers arguably breakdown and expand on the theory’s formulation. Individuals are a unit of analysis at which to study society, but it should be remembered that society is not just made up of a large number of individuals, but contains groups and organisations and so any general sociological theory should be able to explain how such social structures come into being and how they are maintained. I shall attempt to evaluate rational choice theory, concluding that it should not ‘retreat to the banal claim that people have reasons for what they do’. Rational choice theory is based on the idea that individuals act for a particular purpose, that is to maximise their utility. In its simplest form rational choice theory states that given a number of options people do what they believe is likely to have the best overall outcome. This concern with outcome is same as Weber’s concept of ‘zweckrational’ action, where an individual performs the action which is most likely to further the individual’s pursuit of a particular goal. Rational choices involve three distinct processes. To illustrate this point I shall use the example of an individual looking for a job. Firstly the individual must collect an optimal amount of information before taking the decision. This would involve visiting the local job centre and looking in that vacancies section of the newspapers to ascertain the kind of employment that is currently available. It is not the case that the more information that an individual gathers, the better of they will be because there are costs associated with the gathering of information. Once the job seeker has received a number of offers of employment and is trying to decide which one to take, he cannot spend too long collecting information, since by the time he comes to his decision, it may be that the best is no longer available, the deadline for accepting the offer may have passed. Time is therefore an important factor in determining the level of information collection that is optimal. When driving a car which has lost its breaks, it is useless for the rational actor to spend time deliberating on his action as there is simply not the time to make a choice, based on the careful analysis of the outcome of each mode of action. Time will play a crucial role in choice situations, especially if the consequences of actions are spread out over time. One choice may yield immediate gains, the alternative a larger but delayed benefit. Therefore to choose between the two, the rational agent must have a justified method of comparing the benefits of alternatives that have different temporal patterns. Depending on the consistency of the time preferences, they can either be rational or irrational. Strotz showed that time preferences that are inconsistent are irrational, and that inconsistency is the result of non-exponential time preferences. Exponential time preference means that the present value of the future decays at a constant rate as the future develops; conversely non-exponential time preferences imply that some parts of the future lose their value more rapidly than others. The time element is particularly important in strategic situations, as it may alter what is considered to be rational. Consider Prisoners Dilemma, if there is a fixed number of moves, the rational behaviour will always be to defect, because on the last move it will be rational to do so, and this continues back to the beginning of the game. However, in ‘repeated’ prisoners dilemma, the individuals interact an indefinite number of times, over an indefinite period of time, it may become rational to attempt to co-operate, in order to build up trust and therefore gain the maximum benefit. The next stage in a rational decision involves the beliefs that are held by the individual, given the information that they have at their disposal. It is not rational for our job seeker to believe that he will earn £300 per week if the highest paid job on offer is only £150 per week. Similarly the belief that he stands a good chance of getting a job for which he is not qualified according to the information that he has collected is not rational. Finally the individual should choose the best means of obtaining his goal, given the beliefs that individual holds. So our job seekers’ goal might be to obtain sufficient money to pay off a debt. If he believes that he can get a job which will achieve this goal and this belief is rational based upon the information which he has collected, then it would be a rational choice of action to get a job, rather than say sell a valuable treasured possession to get the money. It is possible to identify 3 distinct elements in the choice situation. The first is the feasible set or the set of all courses of action available. The second is the set of rational beliefs about the causal structure of the situation, this determines what courses of action will lead to what outcomes. The third is the subjective ranking of the feasible set, derived from ranking the outcomes to which they are expected to lead. The rational action, therefore is to choose the highest ranking element in the feasible set. It is important to remember, that when considering hu