Rational Choice and Economic Liberalism

In our semester long analysis of the economic development of both China and India, our recent discussions of rational choice theory help facilitate an analysis of the economies in these two emerging markets.

Rational Choice Theory states that behavioral patterns which exist in societies are the product of choices made by individuals of the state in order to maximize profits and minimize costs.

An analysis of the Chinese economy proves this. China has the fourth largest GDP globally and has sustained an economic growth rate of 10% per year for the last 25 years. Prior to the late 1970’s China had a Soviet-influenced economy that did not promote trade and international commerce. The Chinese government began to reform the economy and since those revisions China has enjoyed above-average growth. It is in these revisions that we see how the Chinese people have been able to become successful domestically, but it is China’s role in the global economy that is so impressive.

China sees newly founded entrepreneurial endeavors occurring at record rates. The Chinese citizen understands the opportunities made available since government reform of the economy. We now see widespread enthusiasm and interest in creating personal wealth in China. Chinese Citizens are working hard and through the individual progress, the state now has adopted a new economic profile on an international scale. The society appreciates the efficiency of markets and China has many more years of economic prosperity ahead.

India’s economic history has followed very closely to that of China. For the majority of it’s history, India has operated under a Socialist-inspired economy. Since the 1990’s India has opened it’s closed economy and has become an international presence just like China. India is now widely known for the strength and intelligence of it’s work force. Thousands of U.S. firms outsource work to China every year. More recently India has become a global investment powerhouse, much like the United States. We are seeing burgeoning investment into India. On the other end India is pledging funds and capital to foreign economies and governments.

Since the economic reforms of the 1990’s, India finds itself in a time of rapid economic progress. The same values and dreams of achieving success and personal wealth exist in India. Indian citizens are now involved in a capitalist system in which profits are maximized. The once socialist driven economic ideology is in the past, and citizens find themselves pursuing profits through international trade and commerce