Poor Homo Economicus
An accidental behavioural economist takes up the defence of Homo Economicus
Are people rational, or irrational? It depends. It certainly depends on exactly what you mean by ‘rational’ or ‘irrational’. You may very well on occasion have judged someone’s choices or behaviour as irrational (maybe even your own!), without referring to a clear, agreed definition. But I suspect it is not a question that exercises you hugely. Sometimes people act rationally, and sometimes they don’t.
But in the weird world that joins economics and finance with the behavioural sciences (like psychology, sociology, and anthropology and so on), human rationality is rather a bigger thing — controversial, even. Some of this world’s denizens are much more categorical in their judgement, and claim (or claim that the other side claims) that people are either wholly rational, or wholly irrational. Behavioural economist Dan Ariely’s first two books were called Predictably Irrational, and The Upside of Irrationality; his fourth one Irrationally Yours — that leaves little to the imagination.
An inaccurate model
Behavioural economics emerged as a reaction to the standard model of human behaviour in classical economics: Homo Economicus. This character is rational, narrowly self-interested, and seeks to…
