Is it Rational to Assume Consumer Rationality? Some Consumer Psychological Perspectives on Rational Choice Theory

Abstract

"Law-and-economics," an influential perspective among some in law (and possibly a few in economics), seeks to apply the basic assumption of economics ? that people are "rational maximizers" (i.e., will try to get the most out of what they have) ? to law. Rational Choice Theory provides the conceptual core of Law-and-economics. After briefly discussing the intellectual heritage of Rational Choice Theory, we address three things. Operating from a consumer psychological perspective, first we examine fundamental assumptions underlying Rational Choice Theory and conclude that many either are, or approach being, untenable. Next, we comment upon arguments raised by Judge Richard Posner (one of the leading proponents of this theory) in defense and elucidation of Rational Choice Theory. We conclude by offering some suggestions which, if adopted, we believe will advance the empirical assessment of Rational Choice Theory.