Rational Choice and Institutionalism PDF

RATIONAL CHOICE AND INSTITUTIONALISM Q2-WEEK 2  LEARNING OBJECTIVES: Define Rational Choice Theory and Institutionalism and explain their key principles in the context of social sciences. Apply Rational Choice Theory to analyze decision- making processes by identifying individua...

RATIONAL CHOICE AND INSTITUTIONALISM Q2-WEEK 2  LEARNING OBJECTIVES: Define Rational Choice Theory and Institutionalism and explain their key principles in the context of social sciences. Apply Rational Choice Theory to analyze decision- making processes by identifying individual preferences, conducting cost-benefit analyses, and explaining utility maximization in real-life scenarios.  RATIONAL CHOICE Rational Choice Theory (RCT) is a framework used primarily in economics, political science, and sociology. It assumes that individuals act in a way that maximizes their personal benefit or utility, making decisions based on rational calculations. The founder of Rational Choice Theory is generally credited to economists and political scientists who developed the theory over time. The key figure most often associated with the early formulation of Rational Choice Theory is Adam Smith, an 18th-century economist and philosopher, particularly through his work in The Wealth of Nations (1776). Smith's concept of individuals acting in their own self-interest laid the groundwork for later theories of rational behavior in economics. However, the modern development of Rational Choice Theory, particularly in the fields of economics, political science, and sociology, can be attributed to several influential thinkers: 1. John von Neumann and Oskar Morgenstern (1944) – Their book Theory of Games and Economic Behavior introduced the mathematical foundations for decision- making and game theory, which influenced the formalization of Rational Choice Theory. 2.Kenneth Arrow (1951) – Arrow's Social Choice and Individual Values explored how individual preferences are aggregated in decision-making processes, further advancing the rational choice framework. 3.Gary Becker (1960s) – An economist, Becker applied Rational Choice Theory to a wide range of social issues, such as crime, education, and family, through his economic approach to human behavior. 4.James Buchanan and Gordon Tullock (1962) – Their work The Calculus of Consent applied Rational Choice Theory to political decision-making and collective actions, contributing to the public choice theory, a subfield of political economy. KEY ELEMENTS: 1. Rational Actors: Individuals (or groups) are assumed to be logical and goal- oriented. They analyze the situation before making decisions, selecting the choice that will give them the highest personal payoff. In real life: A student deciding whether to invest more time in studying for an important exam instead of hanging out with friends. The payoff is a good grade, and the cost is missing out on leisure time. KEY ELEMENTS: 2. Preferences and Choices: People have preferences (or wants) and rank them according to their priorities. These preferences guide their decisions. Choices are made when these preferences interact with the available opportunities. In real life: A person choosing to spend money on a new phone instead of saving for the future shows a preference for immediate gratification over long-term savings. KEY ELEMENTS: 3. Utility Maximization: This is the principle that people aim to achieve the most favorable outcome or benefit (utility) with each decision they make. For example, when consumers buy products, they are trying to maximize their satisfaction within their budget limits. KEY ELEMENTS: 4. Cost-Benefit Analysis: People weigh the advantages and disadvantages (costs and benefits) of different actions. The choice that has the highest net benefit is the rational choice. In real life: Before enrolling in a school club, a student might consider the time commitment (cost) versus the skills and friends they will gain (benefit). BASIC CONCEPTS AND PRINCIPLES OF RATIONAL CHOICE 1. Utility Maximization means that a person will choose the object that provide the greatest reward at the lowest cost. A good example of utility maximization is selecting a product based on its features and low market price compared to other brands that offer same features at a higher price. 2.Structure of preferences means that a person will make choices related to his/her goals and determine the ways to attain those goals. Example: buying a house and lot by using a person's savings or applying for a housing loan in a private lending company. 3.Centrality of individuals in explanation of collective outcomes means the results of individual actions and interactions will lead to social change or group outcomes. Example: Protest and Activism INSTITUTIONALISM  Institutionalism Institutions are patterns, norms rules and schemes that govern and direct social thought and action. Institutionalism, therefore, is an approach that aims to understand and analyze how actions, thoughts, and meanings penetrate into the social consciousness deeply enough to embed themselves into social psyche.  STRUCTURES The most significant element of an institution. Structure may be either formal (legislature, bureaucracy, political parties, mass-media) or informal (a network of interacting organizations or a set of shared norms). Rather it involves groups of individuals in some sort of patterned interactions that is predictable based upon specified relationships among the actors.  Formal and Informal Institutions Formal Institution can be distinguished by what rules, practices and norms they derive authority from. Formal institutions are codified rules, policies and norms that are considered official, originating from state laws, government or organizations. Examples: constitution, official law, regulation, standards enforced by the state  Formal and Informal Institutions Informal institutions, on the other hand, are equally known rules and norms but are not commonly written down. Informal institutions are social practices that have been commonly viewed as acceptable and are more persistent than codified laws like that of formal institutions. Examples: Informal institutions, social norms, attitudes, traditions, self-enforced morals TYPES OF INSTITUTION  FAMILY The role of this institutions is to procreates (have children), nurture, and teach values.  RELIGION This institution answers the unanswerable, establish morality, deal with death and the afterlife.  ECONOMY This institution is concerned with the production, consumption, and distribution of goods and services; supply & demand.  GOVERNMENT This institution is entrusted with making and enforcing the rules of a society as well as with regulating relations with other societies. (political order)  EDUCATION It is a place where people of different ages gain an education, including preschools, childcare, primary- elementary schools, secondary-high schools, and universities.