Economists Do It With Models

Warning: “graphic” content…

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Why I Study Behavioral Economics, In Cartoon Form…

September 12th, 2013 · 4 Comments
Behavioral Econ · Just For Fun

Behold…

I am teaching behavioral economics this semester, and I was a little disappointed that Zach didn’t post this comic until a few days after the start of class, since it’s a great jumping off point for a conversation about what exactly it means to be “rational” in an economic sense.

Technically speaking, “rational” isn’t really a synonym for “makes good decisions,” mainly since good implies some sort of normative value judgment. In other words, people can make totally rational choices that you totally think are stupid. Therefore, I tried to come up with a taxonomy of rationality to give to my students:

  • Utility maximizing
    • Able to process all necessary information fully, objectively, and costlessly
      • Not susceptible to framing manipulations
    • Well-defined and well-behaved utility and preferences
      • Complete and transitive preferences
      • Time consistent
      • Long planning horizon

Each of these properties has a specific meaning, so I am going to devote a number of posts over the next week or so to talking about each of these points in more detail. For now, let it suffice to say that the principles of behavioral economics have far more humor potential*. 🙂

* I also might have used the phrase “like the Real World, behavioral economics is what happens when people stop being rational and start getting real,” so the realization of said humor potential is still in question.

Tags: Behavioral Econ · Just For Fun

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