Kenneth Arrow - Rationality Quotes

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Certainly, there is no general principle that prevents the creation of an economic theory based on other hypotheses than that of rationality.

Kenneth Arrow

I want to stress that rationality is not a property of the individual alone, although it is usually presented that way. Rather, it gathers not only its force but also its very meaning from the social context in which it is embedded.

Kenneth Arrow

Not only is it possible to devise complete models of the economy on hypotheses other than rationality, but in fact virtually every practical theory of macroeconomics is partly so based. The price- and wage- rigidity elements of Keynesian theory are hard to fit into a rational framework, though some valiant efforts have been made. … But if the Keynesian model is a natural target of criticism by the upholders of universal rationality, it must be added that monetarism is no better. I know of no serious derivation of the demand for money from a rational optimization. … The use of rationality in these arguments is ritualistic, not essential.

Kenneth Arrow