Theory of choice

Abstract

This chapter defines the main features of rationality and consumer choice as perceived by post-Keynesians, as well as the differences between risk and fundamental uncertainty. It includes definitions of concepts such as ambiguity, black swans, epistemic uncertainty, including procedural and substantive uncertainty, ontological uncertainty, based on either complexity or unknown unknowns. Other defined concepts include the weight of an argument. The various kinds of rationality are analyzed, including unbounded rationality, bounded optimization, cognitive illusions and environment-consistent rationality. The implications for theoretical analysis of various rules of procedural rationality are then presented. The various principles of post-Keynesian consumer choice are then presented, namely procedural rationality, satiable needs, separability of needs, subordination of needs, the growth of needs, non-independence and heredity. It is shown that there is a great deal of similarity between this vision of consumer choice and that perceived by ecological economists.