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New Challenges to the Rationality Assumption

Daniel Kahneman
Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte Staatswissenschaft
Vol. 150, No. 1, Symposium on The New Institutional Economics Bounded Rationality and the Analysis of State and Society (March 1994), pp. 18-36
Stable URL: http://www.jstor.org/stable/40753012
Page Count: 19
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
New Challenges to the Rationality Assumption
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Abstract

In contrast to logical criteria of rationality, which can be assessed entirely by reference to the system of preferences, substantive criteria of rational choice refer to an independent evaluation of the outcomes of decisions. One of these substantive criteria is the experienced hedonic utility of outcomes. Research indicates that people are myopic in their decisions, may lack skill in predicting their future tastes, and can be led to erroneous choices by fallible memory and incorrect evaluation of past experiences. Theoretical and practical implications of these challenges to the assumption of economic rationality are discussed.

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