Rational choice theory is a tool for devising a scientific explanation of the way individuals make choices; it is based on the notion that individuals attempt to find the most effective method of attaining their personal goals. Rational choice theory is a fundamental instrument for understanding ethical behavior and is compatible with the idea that such behavior is rooted in the biology of human nature.

An Illuminating Example

Suppose a person has $10 to spend in a store that has goods X and Y at prices p_x and p_y. To determine how the person will spend the $10, an economist assumes that the person has a preferences function u(x, y) that he or she maximizes subject to the income constraint p_xx + p_yy = $10, where x is the amount of X purchased and y is the amount of Y purchased. The...