Rational choice theory

Sociological theory / From Wikipedia, the free encyclopedia

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Rational choice theory refers to a set of guidelines that help understand economic and social behaviour.[1] The theory originated in the eighteenth century and can be traced back to political economist and philosopher, Adam Smith.[2] The theory postulates that an individual will perform a cost-benefit analysis to determine whether an option is right for them.[3] It also suggests that an individual's self-driven rational actions will help better the overall economy. Rational choice theory looks at three concepts: rational actors, self interest and the invisible hand.[4]

Rationality can be used as an assumption for the behaviour of individuals in a wide range of contexts outside of economics. It is also used in political science,[5] sociology,[6] and philosophy.