The Rational Agent Problem

Abstract

The concept of a rational agent is a cornerstone of economic theory. In this paper, I follow its development from the early understanding of the rational agent as a subject that is realizing its self-interest to the later understanding of the rational agent as a consistent subject. I try to show how this evolution of theory influenced the findings of economic theory and what consequences it has on the workings of institutions that use economic theory as guidance for their decision making.