rationality

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Are Consumers Really Rational?

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Much of consumer choice theory relies on the notion of individuals as economic agents; that is, beings of absolute rationality who don’t struggle with everyday problems like self-control and decision-fatigue. These agents conduct marginal analysis to extract every drop of wellbeing from seemingly routine decisions. In the late 70s, however, psychologists began to interfere with …

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Rethinking the Rationality paradigm…

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Rationality is often assumed, yet far from perfect. The question remains, does rationality still have a place in modern economic thought? Hugh Oliver discusses.

This article first appeared in Short Supply 2016 – check out the full magazine via the Short Supply tab at the top of this page!

Behavioural economics: a primer

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The rational man is known well to any classical economist, writes Philip Grossman. But his devilish counterpart, the irrational man, is uncharted territory. Enter behavioural economics.

Scavenging for rationality at the Camberwell Sunday Market

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In economics, we are often presented with the benchmark of a perfectly competitive market, in which a large number of buyers and sellers trade homogenous products with perfect knowledge regarding price and utility. The only feature Camberwell Sunday Market shares with this benchmark is a large number of buyers and sellers.

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The Economic Man 2.0

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“For most of the past two centuries, economic thinking has been dominated by the concept of Homo economicus. The hypothetical Economic Man knows what he wants; his preferences can be expressed mathematically in terms of a ‘utility function.’ And his choices are driven by rational calculations about how to maximize that function: whether consumers are deciding between corn flakes or shredded wheat, or investors are deciding between stocks and bonds, those decisions are assumed to be based on comparisons of the ‘marginal utility’, or the added benefit the buyer would get from acquiring a small amount of the alternatives available.” – Paul Krugman on the rational-agent model

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Terrorism, fear and the impacts on economic rationality

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The recent terrorist attacks in Kenya and Pakistan have reinvigorated the worldwide fear of extremist violence. The far-reaching effects of these tragic events have substantial impacts on the way people choose to live their lives. Terrorism induces fear. This natural human reaction causes subjective beliefs and reality to diverge. Exploring the consequences of terrorism is a challenge for economists, especially with regard to the effects on rationality, consumption and economic behaviour.

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