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Rationality and Institutions

It is now commonplace to renounce rational action in the social sciences. It is claimed that rationality as the maximization of self-interest is impossible as well as that it is unethical. Yet rational choice remains a most important paradigm for understanding human behaviour. D. Kahneman has contributed to the analysis of human action criticizing the two endpoints, namely perfect individual rationality on the one hand and group or collective decision making on the other hand. The first suffers from bias and the second from noise. Thus, there is somewhat of a contradiction here somewhere, as group rationality could not cancel out individual deficiencies.