How Economics Becomes Ideology: The Uses and Abuses of Rational Choice Theory

Abstract Rational choice theory is often presented as essential to the truly scientific study of economics. To the contrary, in this paper I argue that when rational choice is treated as the key to a science of human agency, it ensnares economics in certain intractable dilemmas. Drawing on hermeneutic philosophy, I argue that economists need to distinguish legitimate from illegitimate uses of rational choice theory. Failure to do so not only leads to self-defeating research goals, but also mires the discipline in an extreme form of free-market ideology. Economists thus have not only empirical but also ethical and political reasons for rejecting the mainstream deployment of rational choice. The paper concludes by briefly sketching a philosophically defensible use of rational choice in economics – one that is more sensitive to the expressive dimensions of human agency and the limits of mechanistic causality.