Rationality: Are we Homer or are we Spock? by mscuttle | Feb 6, 2017 | Featured, Unit 1 | 18 comments Dan Ariely – Predictably Irrational Discussion Question: Is it reasonable for economists to assume people are rational? 18 Comments Brandon on February 6, 2017 at 1:48 pm I think that it is reasonable to assume that people are rational since as we have seen in the above videos, even things that seem irrational actually have an underlying rational explanation. An example would be something like a decision made using a form. It may seem like people are making the decision irrationally but in reality they could just be selecting the default option. Reply Isaac Wong on February 6, 2017 at 3:50 pm If economists were to assume that people are irrational and do not make logical decisions, it would be impossible to predict consumer behavior and develop reliable trends. Although humans can make irrational decisions from time to time, this does not deem them to be rational. Rationality of humans must be considered a constant in order to analyze the effects of changing variables. Reply Edward Wang on February 6, 2017 at 3:55 pm Yes. Irrationality cannot be a factor when analyzing economic systems, as it is unpredictable. The thinking process of each individual person in the system is not a variable that can be accurately accounted for by economists. Economic study dictates that some variables must be held constant in order to come to a reasonable conclusion. Reply Aaron Gao on February 6, 2017 at 3:56 pm It is reasonable for economists to assume people are rational. Based on this assumption, general trends and patterns in the economy would be justified, rather than being disputed through thoughts of “this action is unreasonable and unpredictable”. Although humans are chaotic and unpredictable by nature, in aggregate the population will make a predictable choice. This principle is which the theory of economics is founded upon. Reply Erfan on February 6, 2017 at 6:16 pm I don’t think economists should assume that people are rational because people are different so they can’t assume that they are rational. Reply Luke Keoshkerian on February 6, 2017 at 7:39 pm It is not necessarily reasonable for economists to assume people are rational. People do put thought into their decisions, but tend to make decisions based on emotional factors, meaning their decisions are not necessarily rational. In addition, as seen from Dan Ariely’s TED talk, decisions can be easily manipulated simply by the presentation of options. Ariely found that decisions can be predicted in some cases, such as the tendency to accept the default option when faced with a difficult decision. If we deepen our understanding of peoples’ seemingly irrational decision making, then it will be easier to predict what type of decision will really be made in a situation, because all people will not necessarily make the decision which seems the most logical or rational. Reply Timothy Sorochkin on February 6, 2017 at 8:01 pm I think that people are not rational as individuals but their trends are predictable on a large scale, probably with statistics or applying equations like ones used in chemical equilibrium, allowing the study of economics. Individuals tend to choose what is in their interests or wishes but often can be misinformed or misled. Reply Viraj Parekh on February 6, 2017 at 8:35 pm I think it is not reasonable for economics to believe that people are rational at all times. Many times due to different reasons, people feel various moods. Emotions such as anger and nervousness can make one second guess themselves or pick a choice without enough thought. Other times when one is excited and too happy, they may also not pay enough attention to their choices. These various conditions affect the people in different ways, making them irrational. Most times of the day, people are influenced by these emotions; thus I think that for most of the day, and at any time that people feel emotion, they are not rational. Another point to consider would be unintentional manipulation, the use of certain words or certain conditions (weather, colour, etc.) can unknowingly cause one to lean towards a particular decision. Although this can not be said to make a person irrational, it can also be said Not to make them rational. For these reasons, I think it is not reasonable for economists to assume people are rational. Reply Adrian Watson on February 6, 2017 at 8:55 pm It is definitely reasonable for economists to be rational. If people were not rational, then economists would not be able to make accurate predictions. Normative economics is the study that predicts how the economy should work, and these predictions can only work if the economists assume people are rational. If people were being unreasonable, then there would be too many “what ifs” to the situation. There would be too many outcomes, and economists would not be able to properly predict the effect on the economy. Although there are some people that are irrational spenders, the majority of the population knows how to manage their money. Therefore, economists have to assume that people are rational, or their analyses would be incorrect, and there would be many spots in their conclusions that are questionable. Reply Hooman Nozari on February 6, 2017 at 10:44 pm It wouldn’t be reasonable for economists to assume everyone is truly rational in all aspects of their life, in particular when making financial decisions. However, economists should and do assume that most people will follow basic roads of rational thought. For example, economists should assume most people understand the basic and relative value of most things, and that people want to have the most of everything that they can. Reply Mia Tucovic on February 6, 2017 at 11:02 pm Although we as people try to base facts on logical reasoning as well as evidence from background knowledge, unlike physics, dealing with a human factor introduces a whole psychological aspect into decision making. It is reasonable to believe that people are rational, but it is also important to consider factors that may influence or manipulate humans as well. As shown in the video, although we believe that one choice may be the most logical, when put to the test the attractiveness of some choices relative to others could persuade us otherwise. Reply ryan jiang on February 6, 2017 at 11:06 pm The most difficult part of economics is definitely the unpredictable element of human behavior. While often time human actors ignore facts, make false assumptions, or simply don’t care, it isn’t practical to model irrational decision-making. Economists should know people are not always rational, but assuming they are USUALLY rational often leads to useful conclusions. The power of economics comes from its ability to understand and predict human incentive. However, we can only model decision making that follows rational rules. Thankfully at least for a time, the rational choice assumption will hold true, during which economists can lead us towards prosperity. It is reasonable for economists to assume people are rational. Still, it’s important to keep in mind that economics as a social science relies on the aspect of human nature; all predictions should be treated with a grain of salt. Reply Norman Boudarga on February 6, 2017 at 11:16 pm I believe it is not reasonable for economists to assume that people are rational. One example of this can be shown when a person may may like apples more than pears and that they like oranges more than apples. The average economist who would assume rational behaviour from the person would assume that they must therefore like oranges more than pears. I believe that this example shows an inaccuracy and sporadicity with human rationality and therefore I believe that it is unreasonable for economists to assume that people are rational Reply Raymond Hao on February 6, 2017 at 11:50 pm It is reasonable for economists to assume people are rational because rational people think systematically to achieve their objectives to the best of their capabilities. Rational people understand that there are gray areas when making decisions so they will weigh the benefits against the costs in order to make the best decision. When the benefits outweigh the costs. the logical and rational result would be to take action. Economists can assume that people are rational because people would choose to take action under those circumstances. Reply Kevin on February 7, 2017 at 12:28 am In my opinion, we are like Homer Simpson. As humans we make many mistakes and we don’t make consistent decisions. Therefore, I think it is fair to say that we learn from our mistakes as we progress and this helps us in future doings. Reply Nicholas T on February 7, 2017 at 12:50 am Economists, by nature, analyze the purchasing and consumption trends of society and describe the trends present to predict future buying behaviour. The trends identified by economists through data mining and analysis require assumptions to be made regarding humanity’s tendency toward rational thought – namely, that there is a psychological reasoning behind all human decisions. However, as discussed in Dan Ariely’s fascinating deconstruction of the mind, Predictably Irrational, humans do not always behave rationally, and in many cases prescribe to a school of irrational thought that is not only repetitious but predictable. Often, when faced with difficult choices, we will choose the option of least resistance – one that is default and chosen for us, rather than intervening. Similarly, cognitive perception of two favourable options shift when an unfavourable interpretation of one is also shown. Thought patterns like these, Ariely argues, are a part of human psychology, and are seen around the world. Thus, it is my belief that it is not entirely reasonable for economists to assume people are rational. While economists by nature must make predictions and analysis based on assumptions regarding human behaviour, and are entirely right to do so, these predictions should not be limited to rational behaviour, but also irrational thoughts and instincts, to better understand the motivations of society and its purchasing behaviour. Reply Sanjae on February 7, 2017 at 1:19 am Yes it is reasonable, because most of the time people want results that will most benefit them and to achieve that, they have to think logically and make rational decisions. If people think ahead of their future, then they can plan accordingly and make decisions based on how they want their future to look like. This gives the people the chance to gain control of their path to achieve their wants and needs. Therefore, people tend to try to be more rational so they can be successful. However, this is not to say that we don’t make irrational decisions because there are times when we are susceptible to making decisions driven by our emotions. However, I believe people try harder to make logical decisions more which makes them more rational than irrational. Reply Kevin Lee on February 12, 2017 at 6:57 pm I believe that it is reasonable for economists to believe that humans are rational. To assume that every decision made by a human is irrational contradicts the whole purpose of trends and patterns. Whenever someone is given a question/decision based on logic, most people would choose the logical option. However, I believe that there are psychological factors and tricks that may misinform the consumer and make them choose a decision that they believe is rational, even though it’s not. In other words, people are rational, however, there are psychological factors and tricks that advertisers may use to cloud one’s psyche that can make them pick the irrational decision. 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