Exploring Rationality

1. Much of economic theory is based on the belief that even if individuals do not always act rationally, enough of them do enough of the time so that the assumption that people are rational is a reasonable approximation of reality. What do economists mean when they say people are rational? Are you rational? Are most of the people you know rational?

2. One of the ways of stating the rationality assumption is, "There are no bozos." What does this statement mean? Did P.T. Barnum accept it when he said, "There is a sucker born every minute?"

3. The logic of choice assumes that people are rational, which means that people have well-defined goals and that they purposefully and logically act to attain those goals as best they can, given their circumstances. You might note that economics does not judge goals as rational or irrational. Economists almost always take goals as given. People are irrational if, given their goals, they act in ways that do not lead to the accomplishment of their goals. 

Use an internet search engine to find the strange story involving "Meiwes" and "Brandes." What did they do that made them newsworthy? Can you argue that Meiwes was rational? How about Brandes? If what they did is rational, what does it take for behavior to irrational?

4. Roughly one in 50,000 people who run a marathon dies as a result. Is this evidence that people are irrational? Explain your answer.

5. People pay for bottled water when the alternative is safe and pure tap water that is free. Does the market for bottled water indicated that people are irrational? Explain your answer.

6. What is spite? Can acting spitefully be rational? Defend your answer.

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