Homo economicus

From RationalWiki

Homo economicus is the theoretical ideal of the "rational" person, often used in economics and political science. This idea is often derided, with critics claiming that people are mostly irrational. However, in economics, rationality merely means that, if a person prefers A to B, and B to C, they will then prefer A to C. Most theories do not expect more from people, and in fact several theories have been created to explain how the lack of information can lead a rational person to making an irrational choice.

This theory is also very important in voter choice in politics, however the incentives in voting are much harder to quantify.

One problem with this theory is that one object may not be objectively better than another. Take cars for example: if car A is more comfortable than car B, and car B is more efficient than car A, which is the better car? A very careful person could list the qualities of each car, assign each a value and add them up to decide which is better.^[1] Most people (assuming they can afford both cars), will decide based on a more instinctual process^[2], which may or may not be a rational decision.

Another problem with rationality in decision making is a lack of information. A rational decision made on incomplete information may not be the same decision made with every aspect of the problem known. This is what happens when you buy something online and promptly frown when you open up the package.

Yet another problem with the economic man is emotional purchasing, such as impulse buying. The candy and gadgets at the front register^[3] are probably not the ideal rational purchase, but people purchase them anyway. Advertising also effects emotional purchasing, as does popularity^[4] and luxury items.^[5]

[edit] Footnotes

1. ↑ Engineers do this sort of thing all the time, but engineers are total nerds.
2. ↑ I.e. "I just like car A better, even if I'll have to pay a little more for gas."
3. ↑ That's a till for you goofy kids across the ocean.
4. ↑ Name brand clothing isn't usually functionally good enough to justify the increase in price over off brands, for example.
5. ↑ For certain items, such as Rolex watches and high-end cars, even the laws of supply and demand break down.