You have the problem that this is reducing rational behaviour to its lowest atomistic common denominator. So you are in fact creating a social system with this as the bias being emphasised.

Rationality is about a calculus of interests. But in a natural system, like a society, it would be the view seen across some proper spatiotemporal scale. So what can a single person see? Or what even can a society see if it is just thinking of the immediate now and not the next several generations?

Rationality can only be applied to the scope it is given. And if history doesn't exist on any single spatial or temporal scale, but instead unfolds in a complex adaptive manner across many scales, then that is the kind of "actor" that has to be at the "centre" weighing the possibilities.

So sure, game theory captures the dynamics of rational interactions. You can figure out the balance between competing and cooperating as the best way to get to some goal.

But your OP is already swallowing right wing market theory as the efficient information method. That definitely works - but it has to be tied back to the left wing thing of socialised institutional view of what matters in the long run.

Of course, new wave economics is trying to make that shift. There are all sorts of moves, like national happiness indexes and triple bottom-line accounting, that attempt to lift the horizons when it comes to applying market judgements. Neo-liberalism was about stripping the institutional wisdoms out to maximise the accelerative freedoms. Now the collective fate of humanity and the planet need to be back in the picture if we are to call ourselves truly rational creatures.

So utilitarianism is half the story. Ensuring that it actually is applied over a broad enough sweep of our history to come is the current challenge.

Economics is not so dumb that it can't understand that. But the problem is that global society has built up such extremes of inequality that self-interest has become polarised. What would be rational for those at the top is rather too divorced with what would work best for those at the bottom.

The system could stumble along a few more years. But to celebrate it as a state of enlightened self-interest - an epitome of rationality - is a little premature.

Since economics has led to so much prosperity and as a field of science has been so successful — Posty McPostface

Lolololol economics as a discipline has probably been one of the biggest institutional failures of human endeavour in all of history; it consistently and famously fails as a predicative science and most of its models can't even be used to fit historical data let alone predict future events. The economy has led to a great deal of prosperity (along with concomitant and widespread misery), but economics as an academic discipline has for the most part been a dismal, useless, failure of a so-called 'science'. It's worth noting that perhaps the chief reason for its complete and utter incapacity as a discipline is precisely the assumption (non-empirical and thus metaphysical in the most pejorative sense of the term) that rationality accords to self-interest. Yanis Varoufakis once put the whole issue of the theology of economics masquerading as science nicely in an interview, which is worth quoting at length:

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"[Economics] is a priesthood that truly believes it is not a priesthood but, rather, a community of scientists. How do they manage to maintain this delusion? The simple answer is because their incantations involve rather advanced mathematics and their rituals are steeped in statistical tests and projections. Indeed, in aesthetic terms, the economists’ papers, models, presentations seem indistinguishable from those of physicists, bio-statisticians etc. The only difference is that, unlike the latter, economists generate nothing more than analytical propositions about economic variables which are, as Popper would have pointed out, profoundly non-falsifiable. And here is the rub. Once their non-falsifiable (and thus non-verifiable) propositions are expressed, the statistical tests that follow (usually referred to as econometrics) give economists a great excuse to imagine that their models have been tested. But tested they never are!

Let me explain this in more detail, as it goes to the heart of your question: The economist first builds a model – say: M – that seeks to explain one or more variables (e.g. wages and employment). Once that complex mathematical model is ‘solved’ (just like a system of two equations in two unknowns, y and x, can be solved by means of a function that links y to x; e.g. y = 3x+5), a so called ‘reduced form’ equation (or system of equations) is derived from that solution. Let’s call this R. What economists are good at doing is demonstrating that R corresponds to M (i.e. when the mathematical relationship R holds, this is consistent with the solution of model M). The virtue of R is that is can be checked statistically: data is collected and used to show that, indeed, there is no evidence that R does not hold in real life. At that point, the economist celebrates with yelps of joy: “My model M has been proven to be consistent with reality.” Alas, what the economist forgets to add is the crux of the matter. And what is that? Two crucial facts:

(a) There is a plethora of models, in addition to M, that are also consistent with R. Which means, naturally, that there has been no demonstration whatsoever that model M has been verified (since an infinity of alternatives could explain R just as competently). Now, of course this is also true in non-experimental sciences like astronomy. Yet, economics is unique. This is why:

(b) Model M, like all possible economic models, can only squeeze their ‘reduced form’ R out of their edifice if dodgy assumptions are made regarding time and/or complexity; i.e. only if they axiomatically dismiss what I call the economists’ ‘inherent error’. The practical importance of this is that the imposition of these assumptions may have succeeded in deriving R out of M but that success is bought at the price of having lost any capacity to predict what a complex economic phenomenon will generate (as outcomes) in the future (recall that if you account properly for both complexity and time in model M, no R is possible). It is in this sense that, as I claimed above, no test of M’s predictive capacity (regarding events unfolding in real time) is possible.

This is a most peculiar failure: The hapless economist uses the same tools as acclaimed physicists and astronomers. She has trained for years to speak precisely the same language as them, to understand the same advanced mathematics, to deploy most complex statistical methods which are an essential part of the scientific toolbox. It is, understandably, incredibly difficult to accept that her work is a form of higher order superstition; a religion couched in the language of mathematics and statistics. Tragically, this is precisely what it is. Come to think of it, what is it that separates science from mythology? The fact that scientific propositions are not self-referential. That, in science (unlike in mythology), when the facts clash with the theory it is too bad for the theory."

Or, on economists' unblemished record of being utterly useless at predicting recessions (for which even the Queen even famously demanded why they were so completely shit):

"In the 2001 issue of the International Journal of Forecasting, an economist from the International onetary Fund, Prakash Loungani, published a survey of the accuracy of economic forecasts throughout the 1990s. He reached two conclusions. The first was that forecasts are all much the same. There was little to choose between those produced by the IMF and the World Bank, and those from private sector forecasters. The second conclusion was that the predictive record of economists was terrible. Loungani wrote: “The record of failure to predict recessions is virtually unblemished.” Now Loungani, with a colleague, Hites Ahir, has returned to the topic in the wake of the economic crisis. The record of failure remains impressive."

https://www.ft.com/content/70a2a978-adac-11e7-8076-0a4bdda92ca2 (possible paywall).

Aside from the charges that economics is a failed science, what can be said about the philosophical conception of 'rationality'. I don't think it's useful to dismiss the entire field of economics, as irrelevant or stupid. There seem to be some issues with delineating the difference between macroeconomics and microeconomics here, at the very least.

Economics, however, has defined rationality to be a form of psychological egoism. — Posty McPostface

It's actually not egoism. Altruism and unselfish behavior can surely be what a person see's as his or her utility and is totally rational behaviour in economics. It could be argued that Mother Theresa maximized her 'Utility function' with her work. A bit different from the usual, but economics starts from the fact that people have different motives (utility functions) and hence this is totally in line with economic theory.

Aside from the charges that economics is a failed science, what can be said about the philosophical conception of 'rationality'. — Posty McPostface

The original tradition of philosophical rationalism was actually a form of intellectual mysticism. It was concerned with finding the 'first cause' or origin of being, starting with Parmenides and developing dialectically over centuries.The final phase was the last of the neo-Platonists, specifically Proclus. Thereafter it was incorporated into (or appropriated by) Christian theology.

The key point about the original tradition of rationality was that 'reason' extended well beyond the modern notion of 'instrumental reason'. The whole universe was understood to be underwritten or animated by reason or Logos, But then, of course, capital-L Logos is now irredeemably associated with fundamentalist Christianity, anathema to anyone rational in today's language.

Look into 'the dialectics of enlightenment' and the instrumentalisation of reason, Adorno and Horkheimer, specifically the latter's book, The Eclipse of Reason. Written in the immediate aftermath of WW2, The Eclipse of Reason argues that individuals in contemporary industrial culture experience a universal feeling of fear and disillusionment, which can be traced back to the impact of ideas that originate in the Enlightenment conception of reason, as well as the historical development of industrial society. Before the Enlightenment, reason was seen as an objective reality. Now, it is seen as a subjective faculty of the mind. In the process, the philosophers of the Enlightenment destroyed metaphysics and the objective concept of reason itself. Reason no longer determines the guiding principles of our own lives but is subordinated to the ends it can achieve. In other words, reason is instumentalized.

The effects of this shift are devaluing. There is little love for things in themselves. Philosophies, such as pragmatism and positivism, aim at mastering reality, not critical reflection. Man seeks to dominate nature, but in the process dominates other men by dehumanizing them, in other words, treating them as ends. Culture forgets the unrepeatable and unique nature of every human life and instead sees all living things as fields of means. Inner life is rationalized and planned. "On the one hand, nature has been stripped of all intrinsic value or meaning. On the other, man has been stripped of all aims except self-preservation." Popular Darwinism teaches only a "coldness and blindness toward nature."