Eastern Star Academy, Inc.

SENIOR HIGH SCHOOL DEPARTMENT

Grade Level: Grade 12 Learning Modality: Modular Distance Learning

Subject: DISS Subject Teacher: Jhener Nonesa, LPT

Most Essential Learning Competencies

Analyze the basic concepts and principles of the major social science ideas:
a. *Psychoanalysis
b. *Rational Choice
c. Institutionalism
d. Feminist Theory
e. Hermeneutical Phenomenology
f. Human-Environment Systems

Duration: Week 5, 3 hours

Learning objectives:
1. Identify the basic concepts of rational choice
2. Applying the rational choice theory with true to life situations.
3. Students will be able to explain how the unconscious mind affects others’ lives.

BASIC CONCEPTS AND PRINCIPLES OF THE MAJOR SOCIAL SCIENCE THEORY.

DISCOVER
ACTIVITY 1

What could be your impression with this illustration? Write your answer below.

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Introduction:

What Is Rational Choice Theory?

Rational choice theory states that individuals use rational calculations to make rational choices
and achieve outcomes that are aligned with their own personal objectives. These results are also
associated with an individual’s best, self-interests. Using rational choice theory is expected to
result in outcomes that provide people with the greatest benefit and satisfaction given the choices
they have available.

Rational choice theory is based on the assumption of involvement from rational actors
which are the individuals in an economy making rational choices based on rational
calculations and rationally available information. Rational actors form the basis of rational
choice theory and are what make rational choice theory effective. Rational choice theory
assumes that individuals are rational actors using rational information to try to actively
maximize their advantage in any situation and therefore consistently trying to minimize
their losses.

Economists may use the rationality assumption as part of broader studies seeking to
understand certain behaviors of society as a whole. The rationality assumption assumes
that all individuals under consideration are expected to be rational actors making rational
choices based on rational choice theory to achieve the very best results for themselves
and their own self-interests.

Rational Choice Theory

Rational choice theory is based on the fundamental tenets of classical criminology,
which hold that people freely choose their behavior and are motivated by the
avoidance of pain and the pursuit of pleasure. Individuals evaluate their choice of
actions in accordance with each option's ability to produce advantage, pleasure and
happiness. Rational choice provides a micro perspective on why individual offenders
decide to commit specific crimes; people choose to engage in crime because it can
be rewarding, easy, satisfying and fun. The central premise of this theory is that
people are rational beings whose behavior can be controlled or modified by a fear of
punishment. In this way, it is believed offenders can be persuaded to desist from
offending by intensifying their fear of punishment. In terms of setting the quantum of
punishment, according to this theory, sanctions should be limited to what is
necessary to deter people from choosing crime (Siegel and McCormick, 2006).

KEY TAKEAWAYS

• Rational choice theory states that individuals rely on rational calculations to make
rational choices that result in outcomes aligned with their own best interests.
• Rational choice theory is often associated with the concepts of rational actors, the
rationality assumption, self-interest, and the invisible hand.
• Many economists believe that the factors associated with rational choice theory are
beneficial to the economy as a whole.
• Rational choice theory is often dominate across behavioral economics but there are
many economists who also study irrational choices.
Self-Interest and the Invisible Hand
Adam Smith was one of the first economists to develop the ideas of rational choice theory
through his studies of self-interest and the invisible hand theory. Smith discusses
the invisible hand theory in his book “An Inquiry into the Nature and Causes of the Wealth
of Nations,” published in 1776.

The invisible hand theory is first built on the actions of self-interest. The invisible hand
theory and later developments in the rational choice theory both refute negative
misconceptions that may be associated with self-interest. Instead, these concepts suggest
that rational actors acting with their own self-interests in mind can actually create benefits
for the economy at large.

The invisible hand theory is based on self-interest, rationality, and the rational choice
theory. The invisible hand theory states that individuals driven by self-interest and
rationality will make decisions that lead to positive benefits for the whole economy.
Therefore, economists who believe in the invisible hand theory lobby for less government
intervention and more free-market exchange opportunities.

Rational choice theory relies heavily on the concept of rationality, albeit in the
narrow connotation of the word – Individuals doing, choosing and selecting the
most cost beneficial method coming up with the most benefit and getting results
that would serve his or her goals and pursuit in life. The keyword here is
“individual” because the theory does focus on individual who is being viewed as
here as rational and active agents are or individuals. It is a theory strongly based on
the idea of a social actor who generally wishes to optimize gains through rationality,
albeit limited by object realities surrounding.

Arguments Against Rational Choice Theory

There are many economists who do not believe in the rational choice theory and are not
proponents of the invisible hand theory. Dissenters have pointed out that individuals do not
always make rational utility-maximizing decisions. Therefore, across the field of behavioral
economics economists can study both the processes and results of rational and irrational
decision making.

Nobel laureate Herbert Simon proposed the theory of bounded rationality, which says that
people are not always able to obtain all the information they would need to make the best
possible decision. Moreover, economist Richard Thaler's idea of mental accounting shows
how people behave irrationally by placing greater value on some dollars than others, even
though all dollars have the same value. They might drive to another store to save $10 on a
$20 purchase but they would not drive to another store to save $10 on a $1,000 purchase.

An Example Against Rational Choice Theory

While rational choice theory is logical and easy to understand, it is often contradicted in the
real world. For example, political factions that were in favor of the Brexit vote held on June
24, 2016, used promotional campaigns that were based on emotion rather than rational
analysis. These campaigns led to the semi-shocking and unexpected result of the vote,
when the United Kingdom officially decided to leave the European Union. The financial
markets then responded in kind with shock, wildly increasing short-term volatility, as
measured by the CBOE Volatility Index (VIX).

Further, research conducted by Christopher Simms of Dalhousie University in Halifax,

Canada, shows that when people are anxious, they fail to make rational decisions.
Stressors that produce anxiety have been shown to actually suppress parts of the brain
that aid in rational decision making.

DEEPEN
ACTIVITY 2

In your own word, give an emphasis on rational choice theory. What could be the best definition of
this theory for you?
DEMONSTRATE

ACTIVITY 3
Instruction: Relate Rational Choice theory in real life. What could be a scenario in your life
that Rational Theory.
 JOURNAL
Name: __________________________ Topic: _____________________________
Subject: _________________________ Week #: ____________________
Write your realization, understandings, and all things you’ve learned and experienced in
accomplishing the module. Write legibly.
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Parent’s/ Guardian’s Signature: __________________

Teacher’s Feedback:
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