RATIONALITY EXCHANGE

Economic Exchange Rationality

The classic economics, which was figured by Adam Smith, as well as by David Ricardo, John Stuart Mill and Jeremy Benthan, observe that humans are rational individuals who maximize profit or material benefit from the transactions or exchange with the others in the free market place. The calculation of cost when determining the choices based on these various alternatives is included in this rationality.

Based on cost and benefit analysis (Harris, 1977, 1979), economic decisions in all communities are produced by individuals or groups, by intentionally considering the advantages which is compared with estimated cost.

Economic Market Rationality

The economic market is the aggregate of the transactions in a very large number. Any ongoing transaction are assumed to occur only if the exchange make benefit for both sides. Thus, benefits are the market rationality. The rationality means expectation that contained in the exchange actors mind.
Rationality: Consistency and Maximization

The practice of rationality in human beings can be identified by using two approaches:

1. Rationality as internal consistency of choice.

2. Rationality as an action that aims to maximize self-interest that is reasonableness of decision-making procedures.

Rational attitude is constantly required a link between the objectives and the means. Therefore, maximizing self-interest is the part of the economic rational behavior.

Rationality and Preference

Economic rationality means that individuals will make up his favorable mind according to his preferences in a prospective situation. Seeing the opportunities is seeing the possibilities for action as well as calculating the consequences that may occur.

As an illustration of when consumers will buy a smartphone, it will first consider a few things like branded products, product features, and price products at the same time take into account the consequences that will result. And when consumers buy Smartphone certainly trust that consumers who purchased a Smartphone can deliver profits in line with expectations and costs incurred.

Preference and opportunities are fundamental factor in the economy. The existence of preference is a subject that undergoes a lot of changes because it is a continuously changing issue which is not merely economic. Change in preferences occurs because human behavior is governed by cultural factors, moral rules and custom.

The Rationality of Exchange Instruments

The existence of exchange instrument is a tangible manifestation of current economic exchange rationalization. The economic rational considerations are inculcated to the exchange instrument. So the exchange instrument can be accepted as a standardized value. The exchange instruments have developed toward a cheaper, faster, and accurate improvement. Money is an exchange instrument which is discovered by rational modern society.

Economic Rationality in Social Exchange

In the social transaction there are also orientation and price mechanism to pursue the economic benefits. The price value of the social transaction walk through a reciprocal social mechanism and social sanctions whenever there is no balance in exchange. In principle, people will always seek the material or non-material benefits in their social interactions.

Economic provides a description of human nature that always involved in the alternative behavior option. It generates option reflecting cost and reward. The balance or comparison between investment and profit in the social exchange is included in the distributive justice definition.



There are some similar transactions in both economic and social. People interact to each other –economically or socially- expect gaining something.