Predictably Rational?

Mainstream economists everywhere exhibit an 'irrational passion for dispassionate rationality.' Behavioral economists, and long-time critic of mainstream economics suggests that people in mainstrean economic models 'can think like Albert Einstein, store as much memory as IBM's Big Blue, and exercise the will power of Mahatma Gandhi,' suggesting that such a view of real world modern homo sapiens is simply wrongheaded. Indeed, Thaler and other behavioral economists and psychology have documented a variety of ways in which real-world people fall far short of mainstream economists' idealized economic actor, perfectly rational homo economicus. Behavioral economist Daniel Ariely has concluded that real-world people not only exhibit an array of decision-making frailties and biases, they are 'predictably irrational,' a position now shared by so many behavioral economists, psychologists, sociologists, and evolutionary biologists that a defense of the core rationality premise of modedrn economics is demanded.

Richard McKenzie is the Walter B. Gerken Professor of Enterprise and Society in the Paul Merage School of Business at the University of California, Irvine. Widely published in academic journals and general audience publications, his two most recent books are In Defense of Monopoly: How Market Power Fosters Creative Production (University of Michigan Press, 2008) and Why Popcorn Costs so Much at the Movies, And Other Pricing Puzzles (Springer, 2008) (www.merage.uci.edu/-mckenzie)