[clarification needed] Julien Freund defines rationalization as "the organization of life through a division and coordination of activities on the basis of exact study of men's relations with each other, with their tools and their environment, for the purpose of achieving greater efficiency and productivity".
[3] Change in human character is expected to be part of the process; rationalization and bureaucratization promote efficiency, and materialism, both of which are subsumed under Weber's concept of zweckrational.
[citation needed] The concept of economic rationalism refers to the ability of individuals and organizations involved in business transactions to make logical decisions that yield net positive outcomes for all stakeholders, including ownership, employees, customers, and the community at large.
Colloquially, the term 'economic rationalization' is often used as an umbrella phrase referring to any business-related decision intended to improve productivity, increase profits, and/or reduce costs arrived at through an insightful analysis of stakeholder behavior.
Smith claimed that economies worked best when left unregulated, a laissez-faire approach to conducting business that was predicated upon the belief that, "businesspeople naturally invest their capitals where they believe they can generate the most value.
[6] This assumption that both the markets themselves as well as the people who participate in them will act in a logical manner would be a foundational concept in economic theory until the early 21st century.
[7] Rationality is thus understood as the process through which reasonable conclusions are reached on the basis of thoughtful consideration of demonstrable proof so that the optimal result may be achieved.
The fundamental cost-benefit analysis is a typical manifestation of the rationalization process in that the calculated advantages or rewards received will demonstrably outweigh the incurred sacrifice required to obtain those gains.
[8] The comic book collector who pays thousands of dollars for a collectible issue that completes a long-incomplete series in lieu of buying groceries for the family may not be making a wise choice or even a prudent decision.
By acknowledging the irrationality of governance, employee relations, marketing, customer service, spending patterns, product preferences, trends, and both public and corporate perceptions, stakeholders are more likely to make more rational decisions when it comes to conducting business.
[8] Economic rationality accepts that human beings will behave in a manner that is based largely on individual needs and wants, irrational impulses, misconceptions, and personal circumstances, all of which render their behavior illogical.
[11] Economists have traditionally favoured RCT because it more easily gives rise to economic models that may be used to predict human behavior on a more macro level.
One of the more often cited critiques of RCT is that human beings are unique individuals who exist within and must respond to a variety of circumstances and necessities, making a universally applicable pattern of decision-making a dubious proposition.
[10] RCT is also criticized for its inability to rationalize reasoning predicated upon intuition or instinct, relying almost exclusively on empirical behavioral analysis to explain and predict decision-making.
[7] Because it offers a more realistic interpretation of human behavior without the need for vast amounts of empirical data, it is this more limited application of logic and reasoning that is likely to define contemporary economic rationalism.