Rational Actor Theory
What is the Rational Actor Theory?
The rational actor theory states that individuals are rational decision-makers who evaluate all of the information and options available to them to make choices that align with their desired goals and outcomes. This theory assumes that people act according to self-interest, choosing the option that maximizes their benefits and minimizes their costs. Rational Actor Theory is foundational in fields such as economics, political science, and psychology, where it helps explain and predict human behavior in various contexts.
The Basic Idea
Let’s go over a simplified example. Imagine you are shopping for a red top. In a store, you find two red tops that you like. Top A is red, a little uncomfortable, and not quite form-fitting. Top B is red, more flattering, more comfortable, but $50 more expensive than top A.
As a rational actor, you would use the information available to you to evaluate the benefits and costs of each option.
Top A
- Benefits: $50 cheaper
- Costs: Less flattering and comfortable
Top B
- Benefits: Flattering and comfortable.
- Costs: $50 extra
The rational actor will make the decision that aligns with their self-interest. If you value saving money more than comfort and style, you will choose top A. If you value comfort and style more than money, then you will pick top B.
The rational actor theory assumes that people make decisions logically in order to maximize their personal benefit. There are a few key assumptions the theory follows:
- People are rational decision-makers. It is assumed that people will use all of the information available to them to make decisions that align with their desired outcomes.
- People make decisions based on self-interest. People will evaluate options based on their relation to their personal preferences and interests.
- People are optimizers. People will make the decision that maximizes utility and benefit.
Economists and policy makers use rational actor theory to make sense of and predict the way that human beings behave.
The assumption that agents are rational provides the intellectual foundation for the libertarian approach to public policy: do not interfere with the individual’s right to choose, unless the choices harm others.
Daniel Kahneman, in his book Thinking, Fast and Slow1
About the Author
Emilie Rose Jones
Emilie currently works in Marketing & Communications for a non-profit organization based in Toronto, Ontario. She completed her Masters of English Literature at UBC in 2021, where she focused on Indigenous and Canadian Literature. Emilie has a passion for writing and behavioural psychology and is always looking for opportunities to make knowledge more accessible.
