Rationality
Ecce Homo
To start, a bit of economic history is in order. Until quite
recently, much of the economic theory underpinning regulatory science and business practice has paid little heed to
such anomalies as Ariely’s Economist example. Indeed a
central concept of classical economics is Homo economicus,
the idea that economic actors are perfectly rational beings.
They possess both the ability to consistently put a price tag
on each of their desires and the judgment and self-control
needed to achieve their goals. In The Economic Approach to
Human Behavior, University of Chicago Nobel laureate Gary
Becker states the matter in an admirably clear way:
The combined assumptions of maximizing behavior,
market equilibrium, and stable preferences, used
relentlessly and unflinchingly, form the heart of the
economic approach as I see it.... All human behavior can
be viewed as involving participants who maximize their
utility from a stable set of preferences and accumulate
an optimal amount of information and other inputs in a
variety of markets.
In their recent book Nudge: Improving Decisions About
Health, Wealth, and Happiness, University of Chicago behavioral economist Richard Thaler and Harvard University law
professor Cass Sunstein paint a much different portrait of economic actors:
Whether or not they have ever studied economics, many
people seem at least implicitly committed to the idea of
Homo economicus, or economic man—the notion that
each of us thinks and chooses unfailingly well, and thus
fits within the textbook picture of human beings offered
by economists ... If you look at economics textbooks, you
will learn that Homo economicus can think like Albert
Einstein, store as much memory as IBM’s Big Blue, and
exercise the willpower of Mahatma Gandhi. Really. But the
