RATIONAL CHOICE, PUBLIC-POLICY AND AIDS

Rational choice theory is a controversial basis for institutional desi gn. Dire warnings have been issued about its potential effects. This p aper examines in detail a single example of rational-choice-based inst itutional design in light of these warnings. The conclusions are that these warnings are ill-founded because they are based on an inaccurate or incomplete understanding of rational choice analysis, that rationa l choice can serve as a basis for effective and humane institutional d esign, and that rational choice has features that make it suitable for policy analysis.