The Neglected Institutionalism of Schumpeter\u27s and Knight\u27s Views of Rationality

The concept of rationality is both the origination point and the Achilles\u27 heel of the study of human behavior in economics. The rationalist view of human nature is arguably the most pressing issue facing contemporary economics. Fields of knowledge other than economics have developed alternative theories of human activity to the neoclassical\u27s pure economic man. They include Abraham Maslow\u27s hierarchy of needs, Kenneth Boulding\u27s grants economy, and John Rawls\u27 original position doctrine. Within economics, the Institutionalists have been the leading critics of the assumption that behavior in the economic sphere is rationally directed. A consensus view of rationality does not exist among Institutionalists. However, a synthesized Institutionalist conception of rationality would include the effects of culture, habit, social structure, and psychological makeup on individual and collective decisions. Additionally, an essential component of such a conceptualization would be the evolutionary aspect of rationalism, or how it develops throughout the life-process. These precepts are widely associated with the work of Thorstein Veblen and J. M. Clark