Rational Choice Theory: Assumptions

The functionality of the theory of rational choice is based on five assumptions devised by the rational choice theorists. These include;

• Optimality. This is the premise that every individual makes optimal decisions that are in line with their preferences and with consideration of the opportunities and constraints they encounter.
• Individualism. This assumption is based on the fact that it is the individuals who take action. It is assumed that the people act rationally and their decisions are deemed self-calculating, self-maximizing and self-interested; which result in wider social outcomes.
• Rationality. This assumption forms the basis of the whole theory. It assumes that every individual chooses a course of action that best suits their needs and which they think will be of advantage to them.
• Self-Regarding Interest. This assumption argues that an individual is only concerned about their welfare, and hence make decisions that favor them. However, it should be noted that optimality is given a priority consideration compared to self-regarding interest. It is noteworthy that, group sentiments such as charity, cooperation and unselfishness may contradict with the assumption of individual optimality. To clarify this, the rational theorists argue that such sentiments may be a form of achieving self-interest; hence can be incorporated into the rational choice theory.
• Structures. Norms and structures are considered special cases in the application of the rational choice theory when they dictate a particular course of action. This creates a significant difference between options applicable in other circumstances and one with the strong structural element; which may present only one choice. Economists argue that, although these structures, which are not optimal, may have an impact on the application of this theory, individuals will always exercise optimal decisions.