Effectuation and rational choice theory

nicht angegebenIn this thesis we analyse Rational Choice Theory in the light of the empirical findings of Effectuation Theory. We begin by describing Rational Choice Theory - a top-down mathematical theory of how agents ought to make decisions to be rational. We then analyse its influence since it was devised in 1954. Secondly, we cover Effectuation Theory - a bottom-up empirical theory of how expert entrepreneurs make decisions. After having described both theories we then derive one fundamental complication that Effectuation Theory entails for Rational Choice Theory, by virtue of being its inverse. The fact that Effectuation Theory claims that successful, expert entrepreneurs use the inverse of Rational Choice Theory for deciding implies, according to Rational Choice Theory, that successful, expert entrepreneurs behave in the way that is arational, or more irrational than less successful entrepreneurs, according to Rational Choice Theory. We take this implication seriously and thus do not hand wave it away by claiming that Effectuation Theory is not a theory of rational behavior. We claim that both theories are theories of decision-making and then provide formal arguments that show how the suggested entailment is obtained. By taking it seriously we derive what seems to be the only possible conclusion: that rationality is contextual. This redefinition of rationality as an endeavor dependent on the particular problem-space an agent finds itself in, solves the problem that had been obtained but creates a new one, namely, if there are two theories of rationality that recommend different, mutually incompatible, actions for the same problem, then one will always be at best irrational according to one theory and rational according to the other, and thus the concept of rational becomes meaningless. We attempt to solve this second problem by refactoring rationality not as conforming to one particular theory at all times but to apply the the proper decision-technology to the environment in which the agent finds itself. We call the ability to do so “Meta-rationality”. We further argue that this proposed theory of meta-rationality fulfills important desiderata that Rational Choice Theory does not, given the implication first derived. We show the fruition of the theory by suggesting where conceptual clarification would be useful, and how it could be connected to existing literature streams. We finish with considerations about the importance of having an appropriate theory of rational behavior