Adaptive Rationality, Adaptive Behavior and Institutions

Abstract

The economic literature focused on understanding decision-making and choice processes reveals a vast collection of approaches to human rationality. Theorists’ attention has moved from absolutely rational, utility-maximizing individuals to boundedly rational and adaptive ones. A number of economists have criticized the concepts of adaptive rationality and adaptive behavior. One of the recent trends in the economic literature is to consider humans irrational. This paper offers an approach which examines adaptive behavior in the context of existing institutions and constantly changing institutional environment. It is assumed that adaptive behavior is a process of evolutionary adjustment to fundamental uncertainty. We emphasize the importance of actors’ engagement in trial and error learning, since if they are involved in this process, they obtain experience and are able to adapt to existing and new institutions. The paper aims at identifying relevant institutions, adaptive mechanisms, informal working rules and practices that influence actors’ behavior in the field of Higher Education in Russia (Rostov Region education services market has been taken as an example). The paper emphasizes the application of qualitative interpretative methods (interviews and discourse analysis) in examining actors’ behavior.

Keywords

• adaptive rationality
• adaptive behavior
• bounded rationality
• institutions
• education