A Critique of Rational Choice Theory

rational choice theory

In his article, “The Failure of Rational Choice Philosophy,” Professor John McCumber argues that as a philosophy, rational choice fails because it is not ethically neutral. McCumber believes rational choice theory encourages people to maximize preferences by acquiring wealth and power; however, not all choices are economically driven, and preferences can be maximized based on determination of other values.

What is Rational Choice Theory?

Rational choice is a theoretical paradigm in which individuals’ choices are explained based on maximizing preferences. Rational choice was developed to help explain voting behavior by the RAND Corporation, a think tank formed in Santa Monica, Calif., in 1951. According to McCumber, rational choice has its roots in the uniquely individualistic American culture. Over time, RAND expanded rational choice into an all-encompassing philosophy, applying its rationales to explain everything from voting behavior to economics. “Today, governments and businesses across the globe simply assume that social reality is merely a set of individuals freely making rational choices.”

McCumber’s Criticisms of Rational Choice Theory

Applied to economics, rational choice theory is presumed to be ethically neutral, because it “does not question people’s preferences; it simply studies how they seek to maximize them.” However, McCumber argues that rational choice theory is not ethically neutral, because its parent philosophy is not ethically neutral. “Whatever my preferences are, I have a better chance of realizing them if I possess wealth and power. Rational choice philosophy thus promulgates a clear and compelling moral imperative: Increase your wealth and power!” Ethical neutrality is lost because the philosophy has stopped studying how individuals maximize preferences and has instead encouraged them that the best way to do so is by acquiring wealth and power.

According to McCumber, if rational choice fails as a philosophy because it is no longer ethically neutral, then its auxiliary theories fail as well. If rational choice philosophy promulgates an imperative to increase wealth and power, then rational choice theory in economics operates to the same end. When faced with two choices, it is more rational to increase wealth/power. As a result, corporate leaders stretch resources and ignore regulations to acquire more wealth and realize their own goals. While it may not be ethical, it is rational. Rational choice theory in economics was criticized in the wake of the 2008 financial crisis, but for McCumber the inherent guiding philosophy must be questioned as well.

Problems with McCumber’s Critique

As an abstract philosophical theory, rational choice makes sense. Surely all individuals are guided by an internal desire to increase personal pleasure. Even the altruistic volunteer must derive some self-interested form of happiness from devoting her time and energy to helping others.

But are we all driven by the “clear and compelling moral imperative to increase wealth and power” in everything that we do? Probably not. The mismanagement of large corporations seemingly fuels a cynical belief that rational choice theory in economics has been perverted to mean greed is good. Nevertheless, the altruistic volunteer donating her time and energy receives no wealth or power for her donation. She may receive personal pleasure, and it would seem rational for her to pursue this, but there is no clear monetary benefit involved. As Professor Jeffrey Nicholas writes on his blog:

Simply put: we are not individual atoms bumping into each other on occasion. We are social beings – social animals as Aristotle says – which means that our identity . . . is shaped by and shapes our communities/society/traditions. Yes, I make rational decisions (I hope), but even my rationality is shaped by my culture: what I find more or less rational, what modes of reasoning are available to me, to what extent I’ve been trained to think reasonably, what forms of discourse I’ve been introduced to, etc. This fact does not make me any the less rational. Au contraire, it is the very conditions for being rational at all.

McCumber’s description of the failures of rational choice philosophy oversimplifies rationality and extrapolates the failures of economic rational theory too far. For him, rationality is predicated on economically driven decisions, such as increasing wealth/power so a person has more tools to maximize his or her ultimate preferences. It makes sense that decisions in economics are guided by this clear and compelling imperative to increase wealth and power, because these values are sought and encouraged in any economy. The same conclusion is hard to apply as a far-reaching philosophy, because not all individuals are economically driven in everything they do.

Policy Solutions

The financial failures of 2008 clearly demonstrate the ethical failures of rational choice theory in economics. So what is to be done? McCumber suggests a policy solution for rational choice theory, which “might look quite a bit like Hegel in its view that individual freedom is of value only when communally guided.” The idea is to replace the ultimate desire of the individual with that of the community. If the end goal is changed, the guiding philosophy will change, and the paradigm will shift from an imperative to increase personal wealth to bettering the community at large. Rational choice philosophy would still not be ethically neutral, but ideally it would be morally (and ultimately, financially) beneficial for the greater majority.

Again, this solution is oversimplified. There are two major problems. The first problem is the definition of “communal.”  What are the “communal” characteristics that will be the guiding principles of this new philosophy? America is an aggregate of cultures, towns, cities, and states, each with its own respective needs and desires. Which community will provide guiding values? The second problem is how to supplant a “communally guided” philosophy into a society founded upon individualism. These questions are difficult to answer, but should be considered in the ongoing search for an ethically and practically viable economic theory.




Jeffery Nicholas, “Rational Choice Theory is Wrong,” Nicholas Musings- Feed the hungry to promote peace (blog),        June 22, 2011, http://www.nicholasmusings.com/Philosophical Musings/files/tag-hegel.php.

John McCumber, “The Failure of Rational Choice Philosophy,” The New York Times Opinion Pages Opinionator          (blog), June 19, 2011, http://opinionator.blogs.nytimes.com/2011/06/19/the-failure-of-rational-choice/.

Photo: Flickr: mermaid99