ABSTRACT
The claims and counter-claims concerning the nature and role of rationality or maximization can be very confusing. This chapter tries to clear up some issues by discussing the methodology of constructing a neoclassical explanation of economic phenomena. If one wishes to abandon psychologism while maintaining methodological individualism, the presumption that rationality is a psychological process must also be abandoned. To consider the relevance of rationality as a psychological process, the key issue is whether or not we are explaining behavior in the context of an equilibrium. Putting maximization beyond question merely demonstrates that maximization is the neoclassical economist’s metaphysics. To some degree, it is possible to claim that the notion of equilibrium is redundant once we assume every decision-maker participating in the economy is maximizing. This is obviously the case with Walrasian general equilibrium theory since the definition of such an equilibrium requires universal maximization.
