Abstract
Economic theories of the firm are theories of rational choice. They use strong assumptions about individual human behavior to derive predictions about aggregate behavior at equilibrium. For the most part, they seek to rationalize observed behavior in markets, to show how it can be imagined to arise from self-interested behavior by individuals and firms. Such theories are somewhat indifferent to two classical distinctions familiar to the behavioral literature. First, they tend to ignore differences between decision making by individuals and decision making by firms, seeing the latter as largely the actions of specific individuals — usually managers but sometimes owners. Second, they move easily from theories of optimal behavior to theories of actual behavior, assuming for the most part that actual human behavior is driven to the optimum by some competitive process.
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