Rational agent. Self Interest.

[Kidlicious]

Originally posted by Park Avenue
Your utility function can change over time, meaning that things you did rationally in the past no longer appear so (perhaps as a result of the past action taking place under uncertainty that is no longer there).

You thought the beggar was genuine, therefore at the time, giving money to him was a rational act. Later on, however, you thought you might have been fooled. It doesn't make your original act any less rational - it was just rational under uncertain conditions.

No. I look back on it and think, "why did I do that? I never do that." I did something irrational. It happens. If you don't think it does then you are simply very confused about the real world. Anyone in touch with the real world knows that people don't always behave either rationally, or irrationally.

[Solly]

Kidicious

"Anyone in touch with the real world knows that people don't always behave either rationally, or irrationally."

I'm with you. I think this is a lot more difficult to think about than many people give credit for.

The classic irrationality that I'm aware of is to do with impatience, ie if you give someone the choice of something in either 6 months time or 12 months time, they'll generally be indifferent.

If you give them the choice of the same thing now, or in six months. They'll tend to choose to have it now.

Is this irrationality/inconsistency of preferences?

[Kidlicious]

Originally posted by Park Avenue
Kidicious

"Anyone in touch with the real world knows that people don't always behave either rationally, or irrationally."

I'm with you. I think this is a lot more difficult to think about than many people give credit for.

The classic irrationality that I'm aware of is to do with impatience, ie if you give someone the choice of something in either 6 months time or 12 months time, they'll generally be indifferent.

If you give them the choice of the same thing now, or in six months. They'll tend to choose to have it now.

Is this irrationality/inconsistency of preferences?

Actually, I think that most people would prefer to have something in 6 months rather than 12 months if you asked them. However, say that you only offer it to them in 12 months and your competitor offers it to them in 6 months. In this case they might just as well buy from you unless it was a very big purchase and they had accountants working on the problem. You can call that irrational, or you can just say they weren't being rational.

As you know, economists don't assume that people always behave rationally. They only say that we can expect people to generally behave rationally, and we can make policy with that expectation.

[Solly]

"As you know, economists don't assume that people always behave rationally."

They do. They have to. Otherwise there's no sound basis.

[Skanky Burns]

Originally posted by Urban Ranger
The problem with the followers of the "feelgood factor" school of thought is they assume that people carry out altruistic acts after some sort of careful, deliberate cost-benefit analysis.

This of course is pure fantasy.

A rational decision is the best decision one can make under the current circumstances, including inaccurate and incomplete information. Regardless of how trivial the decision, it is made after some sort of cost-benefit analysis. It need not be careful, nor even a conscious action, but the analysis is doneon some level.

[Kidlicious]

Originally posted by Park Avenue
"As you know, economists don't assume that people always behave rationally."

They do. They have to. Otherwise there's no sound basis.

I'm sorry, but you didn't learn much during your studies. Did you go to Imran's college.

[Imran Siddiqui]

economists don't assume that people always behave rationally. They only say that we can expect people to generally behave rationally

They say both. Economists do say that generally people behave rationally. But PA is also correct, economists, in creating their models and theories, assume that people always behave rationally. It's an assumption that must be made in order for any kind of model to be created.

To say otherwise means you were snoring through your classes.

[BeBMan]

Don't listen to them.

[Solly]

And generally the largest qualification to the rationality theory is that it is rationality under massive uncertainty.

How rational can that be really?

[Kidlicious]

Originally posted by Imran Siddiqui

economists don't assume that people always behave rationally. They only say that we can expect people to generally behave rationally

They say both. Economists do say that generally people behave rationally. But PA is also correct, economists, in creating their models and theories, assume that people always behave rationally. It's an assumption that must be made in order for any kind of model to be created.

To say otherwise means you were snoring through your classes.

With the graphs you have to assume rational agents. I was talking about over all theory.

[Urban Ranger]

Originally posted by Skanky Burns
A rational decision is the best decision one can make under the current circumstances, including inaccurate and incomplete information. Regardless of how trivial the decision, it is made after some sort of cost-benefit analysis. It need not be careful, nor even a conscious action, but the analysis is doneon some level.

Really?

Suppose you see a man is about to be run over by a car. You have just a fraction of a second to decide whether you act to save him or not. Under such a situation, what factors go into said analysis, how do you weight them, and on what level would such an analysis occur? How do you demonstrate that such an analysis did in fact occur?

[Kuciwalker]

Because he made a decision! Impulses actually traveled to and from his brain!

[Kidlicious]

Originally posted by Kuciwalker
Because he made a decision! Impulses actually traveled to and from his brain!

Impulses are not analysis.

[Kuciwalker]

That's a completely meaningless statement.

Impulses traveled to his brain, as opposed to stopping at some point midway and simply causing a reflexive action. His brain, his seat of conciousness, made a decision. The thought processes - however brief - that led to the decision are the analysis. Even if it was just "oh ****, that car's coming strait at me" and he jumps aside.

[Kidlicious]

Originally posted by Kuciwalker
That's a completely meaningless statement.

Impulses traveled to his brain, as opposed to stopping at some point midway and simply causing a reflexive action. His brain, his seat of conciousness, made a decision. The thought processes - however brief - that led to the decision are the analysis. Even if it was just "oh ****, that car's coming strait at me" and he jumps aside.

First, any decision is rational, and now any impulse to the brain is analysis.