What is Rationality? Individual and aggregate considerations.

In this presentation I discuss the nature of rationality, focusing on both individual and aggregate considerations. I first provide a historical overview by focusing on Herbert Simon's conception of rationality, along with linking it to current work by Daniel Kahneman and others in behavioral economics. My particular focus is on the perceptual foundations of this work (assumptions about awareness, veridicality, etc), and the problem that these foundations present for understanding rationality. Building on insights from the cognitive sciences I discuss the outlines of an alternative view of rationality. I argue that this alternative model is well suited for the ambiguous, uncertain and multistable situations that individual and aggregate economic actors find themselves in. I link this work to the conference theme of emotion and anticipation, and the more general microfoundations of expectations and beliefs.