Introduction

It is commonly believed that the rationality postulate, whatever that may mean, stands at the core of economic theory and much of social science research. Many economists go so far as to define their science in terms of the rationality assumption. I therefore try to spell out how working economists approach rationality, with the goal of explaining the practice of economic science to philosophers and other social scientists.

I do not survey the enormous literature on the methodology of economics. Much of this literature focuses on philosophy of science rationales (or lack thereof) for rationality assumptions. The writers debate instrumentalism, the use of rhetoric to discuss rationality, whether assumptions need be realistic, and whether economic propositions are or should be falsifiable, to name a few of the better-known issues. These debates have generated insight, but taken alone they give a misleading picture of what economists do. Often they focus on economics as a whole — or on one or two fields — rather than on the increasingly diverse ways in which contemporary economists conduct their research.

Philosophers, on the other hand, commonly believe that economic logic focuses on instrumental rationality, as exemplified by a Humean ends-means logic. That is, economics focuses on how to use means to achieve given ends, but it cannot judge the quality or rationality of those ends. Philosophers have put forth alternative notions of rationality, including “practical reasoning,” procedural rationality (do our mental processes for forming values make sense?