I have been eaves dropping on the great Penl rationality debate. At this point I would like to second the posting from Gil Skillman that argues that most important progressive critiques of capitalism can be conducted within the confines of reasonable rationality assumptions. I have always thought most people get the purpose of the assumptions backwards. We do not postulate individually rational behavior and analyze the outcomes because we believe people actually behave this way all, or even most of the time. Instead, we analyze the consequences of individually rational behavior in particular institutional settings in order to judge the desirability of those institutional settings. If individually rational behavior in a particular institutional context -- such as a competitive market, or private employement, or central planning -- can be demonstrated to be socially irrational or counter productive in the sense that better outcomes were physically possible, then we have the best critique of those institutions as socially counter productive that I can imagine. So the assumption of individual rationality is not motivated out of interest in explaining actual human behavior but as the best way to evaluate the usefulness or uselessness of particular social institutions. The key is seeing that social institutions make certain behavior individually rational. If that behavior pattern is socially rational, or socially pro- ductive, then the social institution deserves high marks. On the other hand, if a social institution promotes individually rational behavior that is socially counterproductive, or socially irrational, then that social insti- tution deserves low marks.
