Rational choice theory is a theory that is used to explain and understand the reasoning behind human behavior. The underlying assumption is that human beings are rational creatures, which means they rely on reason and logic to make decisions.
The theory can be used to understand both individual and social groups’ behavior in various disciplines including economics, sociology and politics.
The commonly cited definition of the rational choice theory is that by Elster (1989), who submitted that:
“…when faced with several courses of action, people usually do what they believe is likely to have the best overall outcome.”
In other words, human beings are rational actors who act in their own self-interest. An individual tends to act as if balancing costs against benefits to arrive at action that maximizes personal advantage.
This definition points to the widely accepted assumption in psychology that human beings are naturally egocentric. The assumption here is that self-preservation and wellbeing are the driving forces behind every individual’s actions.
The Four Assumptions of Rational Choice Theory
The theory makes several assumptions about human behavior that are often disputed. These include:
- Decisions are a simple matter of cost vs reward
- People take action when benefits outweigh costs
- People will take no action, stop taking action, or take opposite action, when costs outweigh benefits
- People utilize the resources they have at hand to maximize opportunity and tip the scales of a decision in their favor
Strengths of Rational Choice Theory
Some of the key strengths of the rational choice theory include:
1. It effectively explains individual behavior
Becker (1976) argued that the rational choice theory model is a unified framework for understanding all human behavior.
The rational choice theory can be used to explain why people behave the way they do. It gives an insight into the motivating factors or psychology behind human decision making. Self-interests are the central factor in explaining human behavior
2. It predicts human behavior
Once the knowledge of why individuals behave in a certain way is available, predictions can then be made.
Because almost every decision-making process is a cost-benefit analysis, actions that result in the most utility maximization can be predicted or anticipated.
In economics, for instance, the rational choice theory can be used to predict customer purchasing patterns and trends.
Rational choice theory can be used to explain the behavior of a social group of like-minded individuals.
Individuals with similar preferences are likely to form a group. The shared interests or common values influence their behavior as a group and can be used to predict future behavior.
Examples of groups that share common interests and values include religious groups, political groups and other social groups.
Criticisms of Rational Choice Theory
Rational choice theory has been criticized for the following reasons.
1. It does not account for altruistic or selfless actions
Rational choice theory is based on the assumption that there is a direct or indirect relationship between an individual action and a benefit.
The theory assumes that all human decisions are driven by self-interest but this is not always the case.
There are actions which are selfless or altruistic in nature and the rational choice theory does not convincingly take these into account.
2. It does not explain impulsive actions
Another weakness of the rational choice theory is that it assumes a careful thought process or cost-benefit analysis whenever an individual has to make a decision.
However, this is not always the case. There are some decisions which are made “impulsively” or without consideration of the consequences.
Not all decisions are rational hence the difference between a good decision and a bad decision.
Intuitive decisions can also be made without much time to weigh the cost and benefits. The theory assumes that there is always enough time to carefully consider the costs and benefits of a decision thereby disregarding impromptu and emotional decisions.
3. When team goals supersede individual goals
Due to its strong emphasis on individual decisions, the rational choice theory ignores the influence of collective groups.
It assumes that all decisions begin and end at individual level. Studies have shown that not all decisions are self-serving as individuals may, at times, succumb to social pressure even at the expense of their own benefit.
Therefore, the rational choice theory can be criticized for failing to take into account societal factors like cultural values and norms which may have a significant influence on the decisions of an individual.
Rational Choice Theory Examples
1. Political scenario: Which political party or candidate to vote for?
When choosing who to vote for, voters will prefer the party that will be of most benefit to them as an individual.
For instance, a wealthy person is more likely to vote for a party that wants to lower taxes on the rich. This person is in turn less likely to vote for socialist parties who tend to favor higher taxes.
Similarly, poorer people are more likely to endorse higher taxes on the rich because it doesn’t affect them, but may lead to better social services.
We can see, in terms of social trends, that wealthier people vote in higher numbers for right-of-center parties and poorer people vote in higher numbers for left-of-center parties.
Nevertheless, this rule does not hold up for all individuals. Some people may vote against their immediate personal interests if they place more value on social cohesion, freedom, or another value. In these situations, a rational choice theorist would still say that the person is making the rational choice – it’s just that they are weighing up costs and benefits in a different way to what we might have expected.
2. Personal scenario: Healthy diet or instant gratification?
Most people have become conscious of the importance of a healthy lifestyle and diet. This is why the fitness industry is fast becoming a lucrative one.
Those who can afford to choose when and what they eat often have to decide between maintaining a healthy diet or instantly gratify themselves albeit with excessive unhealthy foods.
In most cases, individuals prefer the former as it tends to have long term health benefits for individuals. The potential personal benefits of healthy eating influence the rational option to maintain a healthy diet.
3. Social scenario: Visit family or enjoy vacation alone?
Another example is that of an individual deciding between spending time with their family or enjoy a vacation alone.
Human beings are naturally social beings which means the need to belong to a group is one that cannot be ignored easily. This might mean overriding individualistic desires to satisfy the social need to belong to a group.
The benefits of enjoying a vacation alone may be outweighed by the benefits of belonging to and participating in a social group hence spending time with family might be the rational choice.
4. Economic scenario: Save for retirement or donate all income?
Consider an individual choosing between saving some money for retirement or donating all of his income without any consideration of his future wellbeing.
Conventionally, saving money would be a favorable choice as it guarantees future financial security for the person.
While donating might give a degree of moral fulfillment as a potential benefit, that benefit would not necessarily outweigh the economic benefit of self-preservation. The rational choice, therefore, would be to save some money to guarantee oneself’s future wellbeing.
The theory can be applied in a range of fields. Some examples include:
- Marketing: Companies put in place limited-time offers to tip the scales of cost vs benefit and encourage consumers to pull out their money.
- Economics and political science: Governments instate policies designed to tip the scales of cost vs benefit on a national scale. For example, subsidies for electric cars can help encourage consumers to buy electric vehicles and stimulate the green economy.
- Sociology and criminology: The theory helps to describe deviant behavior and why people choose to engage in antisocial behaviors.
- International relations: The theory underpins approaches to international relations, including Germany’s (now failed) approach to integrating Russian and German economies to make a Russian war in Europe a bad choice for Russians whose economy would tank. It also underpins the concept of mutually assured destruction in nuclear policy.
Rational choice theory is a theory that explains human decisions. This theory tries to describe the self-serving nature of individual decisions. It borrows from the general principle that human beings are naturally selfish and will therefore always choose an option that costs less and benefits them more.
Rational choice theory can be utilized to explain and predict human behavior in various disciplines including economics, sociology and politics as illustrated in the examples section.
The main strength of the theory lies in its ability to explain and predict both individual and social groups’ behavior. However, it often fails in cases where individuals do not have adequate information or time and opportunity to weigh the cost and benefits before making decisions.
Abell, P. (2000). Putting Social Theory Right? Sociological Theory, 18(3), 518–523.
Becker, G. (1976); The Economic Approach to Human Behavior, Chicago and London: The University of Chicago Press, pp. 3-14.
Elster, J. (1989); Social Norms and Economic Theory, Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117.
Friedman, M. (1953); Essays in Positive Economics, Chicago: University of Chicago Press. pp. 15, 22, 31.
Hechter, M. (2019). The future of rational choice theory and its relationships to quantitative macro-sociological research. In Rational Choice Theory and Large-Scale Data Analysis (pp. 281-290). Routledge.