Economic rationality is a part of the taken-for-granted assumptions of how organizations are understood and studied. Organizations have economic purpose and intent; organizational structures, systems, and policies are designed to achieve goals or ends. Ergo, organizations are rational. All this notwithstanding, there is an abundance of literature illustrating that organizations often follow purposes and objectives which do not make strict economic sense and that structures, systems, and purposes are rarely designed and often fail to achieve stated intent or purpose. Although economic rationality is often presented as a discrete, coherent, and readily identifiable mode of rationality, it elides a series of confusions and contestations: disputed definitions of rationality; disagreements as to what behaviours typify it and how it may be identified; and strong objections to the characterization of its dominant actor, homo economicus. Its genesis, both from debates about the nature of individual autonomy and from the disciplinary development of economic thought, where rationality arrives as a relative latecomer, reveals a series of discrete strands of literatures and debates that coalesce in a generic, rather fragmented, understanding. These various strands and how they have impacted on organizations form the basis of this chapter.
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