Abstract

The rational choice framework assumes that individuals know what is in their self interest and make choices accordingly. Do they? When they go to the supermarket (in a developed country with a market economy) arguably they do act accordingly. In such settings, the individual knows, almost certainly, whether the choice would be beneficial, ex post. Indeed financial markets in the developed market economies (usually) possess the essential characteristics consistent with substantive rationality. However, it is simply not possible to make sense out of the diverse performance of economies and polities both historically and contemporaneously if individuals really knew their self interest and acted accordingly. Instead people act in part upon the basis of myths, dogmas, ideologies and "half-baked " theories. We argue here both that ideas matter, and that the way that ideas are communicated among people is crucial to building useful theories that will enable us to deal with strong uncertainty problems at the individual level.2 For most of the interesting issues in political and economic markets uncertainty, not risk, characterizes choice-making. Under conditions of uncertainty, individuals ' interpretation of their environment will reflect the

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