Comments on: When is acting irrational the rational thing to do? http://welkerswikinomics.com/blog/2009/11/02/when-is-acting-irrational-the-rational-thing-to-do/ for students and teachers of Economics Wed, 23 May 2012 04:39:58 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Pilar Muller http://welkerswikinomics.com/blog/2009/11/02/when-is-acting-irrational-the-rational-thing-to-do/comment-page-1/#comment-12010 Pilar Muller Mon, 08 Nov 2010 06:01:30 +0000 http://welkerswikinomics.com/blog/?p=1062#comment-12010 1. To a certain extent, economists are wrong to just assume that consumers always act rationally. In most of the cases, they do not because the human being is also irrational at times. Nevertheless, there are also consumers who act just rationally in order to maximize their total utility. In the end, if e.g I have 10 dollars to spend on popcorn, the rational thing for me to do would be to spend all of my income until my total utility reaches its peak. In the case of the Papuan farmers, they do not use all of their land (rational way), not because they are lazy but because they have superstitions. Because of the irrationality of humans to belive in superstition and evil, the Papuan farmers acted in an economically speaking irrational way, in order to ensure their own well-being. 2. I have experienced many times where, when I was really thirst, I just went buy a soda to the next best shop. However, most of the times you get to a store where they are selling their sodas for a too high price, which means that my total utility of consuming a soda does not correspond with the very high price. In that situation, however, the irrational consumer might just buy the soda, because he/she is so thirsty and cannot wait to get to another store (irrational behavior). 3. I would say that charity might be seen as irrational because the consumer does not spend that money for himself/herself. Nevertheless, most consumers give money to a charity when they have earned a big profit or are just having a sort of "surplus" concerning money, which does not make them worse off, and does not really lower their purchasing power, since they mostly already have enough money to spend. Yes, it might be irrational not to steal when there is a 0% chance of getting caught. However, since we are human beings, we are taught from very young on that stealing is bad, which would be seen as economically irrational and thus we mainly do not steal, if possible. 1. To a certain extent, economists are wrong to just assume that consumers always act rationally. In most of the cases, they do not because the human being is also irrational at times. Nevertheless, there are also consumers who act just rationally in order to maximize their total utility. In the end, if e.g I have 10 dollars to spend on popcorn, the rational thing for me to do would be to spend all of my income until my total utility reaches its peak.

In the case of the Papuan farmers, they do not use all of their land (rational way), not because they are lazy but because they have superstitions. Because of the irrationality of humans to belive in superstition and evil, the Papuan farmers acted in an economically speaking irrational way, in order to ensure their own well-being.

2. I have experienced many times where, when I was really thirst, I just went buy a soda to the next best shop. However, most of the times you get to a store where they are selling their sodas for a too high price, which means that my total utility of consuming a soda does not correspond with the very high price. In that situation, however, the irrational consumer might just buy the soda, because he/she is so thirsty and cannot wait to get to another store (irrational behavior).

3. I would say that charity might be seen as irrational because the consumer does not spend that money for himself/herself. Nevertheless, most consumers give money to a charity when they have earned a big profit or are just having a sort of "surplus" concerning money, which does not make them worse off, and does not really lower their purchasing power, since they mostly already have enough money to spend.

Yes, it might be irrational not to steal when there is a 0% chance of getting caught. However, since we are human beings, we are taught from very young on that stealing is bad, which would be seen as economically irrational and thus we mainly do not steal, if possible.

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]]> By: Gavin Steinhubl http://welkerswikinomics.com/blog/2009/11/02/when-is-acting-irrational-the-rational-thing-to-do/comment-page-1/#comment-8391 Gavin Steinhubl Wed, 26 Aug 2009 05:00:17 +0000 http://welkerswikinomics.com/blog/?p=1062#comment-8391 1) I dont believe economists are wrong to assume that people make decisions rationally, i do however believe that it should just be an assumption, and not stated as a fact. In the example given, most people would still be rational and cultivate all the land, like most economists would expect, however there will always be outliers. With the land example, its just one small country, Papua New Guinea, that is used. So in most cases the economists would be correct and the farmer would be rational to maximize profit, but in some special circumstances there will be the exceptions. As for the people of New Guinea, i don't think they are stupid or lazy, because they are doing it for reasons we wouldnt understand. Because Switzerland isnt the same culture, we wouldnt have the same problem as the farmers of Papua, so we cant really say they are stupid or lazy for their choice not to fully cultivate. 1) I dont believe economists are wrong to assume that people make decisions rationally, i do however believe that it should just be an assumption, and not stated as a fact. In the example given, most people would still be rational and cultivate all the land, like most economists would expect, however there will always be outliers. With the land example, its just one small country, Papua New Guinea, that is used. So in most cases the economists would be correct and the farmer would be rational to maximize profit, but in some special circumstances there will be the exceptions. As for the people of New Guinea, i don't think they are stupid or lazy, because they are doing it for reasons we wouldnt understand. Because Switzerland isnt the same culture, we wouldnt have the same problem as the farmers of Papua, so we cant really say they are stupid or lazy for their choice not to fully cultivate.

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