Modern economics textbooks assume all people are rational. By this they mean we are logical and only do things that are in our interests. Yet once you close the textbook and enter the real world you find numerous exceptions to this rule. The world is full of people acting irrationally and doing things no textbook can explain. If we were rational then the world would be a unrecognisably different place.
If we were rational there would be no war. What is rational about wholesale destruction and killing often for obscure reasons? There are no winners in war; there are only those who lose the least. Can anyone draw a utility curve of the Battle of the Somme? No gain from war is ever enough to compensate from the loss it causes. War destroys the resources and labour of a country. What isn’t destroyed is wasted. So many countries have spent money on guns and tanks while its people live in poverty. If we were rational we would not engage in senseless destruction that has plagued human history.
If we were rational we wouldn’t smoke. What is logical about inhaling toxic fumes that don’t even taste nice? How can people who deliberately shorten their life for little or no gain be called rational? What about fast food? The short-term pleasure is clearly at the expense of long-term health problems. Rational people supposedly take long-term costs and benefits into account, yet why is there an epidemic of obesity in America? Why do people use drugs? How could any heroin addict be described as rational? What about alcohol? It’s an addictive drug that makes you say and do things you probably shouldn’t and may not remember. Yet it’s considered strange for to have a social outing that does not involve alcohol. How can some as illogical as this be such a crucial part of society and culture (speaking from an Irish point of view)?
If education is so crucial for your future then why do people drop out of school? If we were rational we would all stay in education until university and get all A’s. A single mother has a hard life (despite why the tabloids might suggest) so why do teenagers have unprotected sex? Given the problem of STD’s (especially AIDS in Africa) why doesn’t everyone use contraceptive? What’s rational about not using seatbelts? How can it be claimed that people drink driving are maximising their utility?
The entire political world is evidence that we do things that make no sense. Can anyone honestly claim there is a good reason why George Bush was elected President? Incompetent and dishonest politicians are regularly elected and often re-elected after revealing their true qualities. How else can you explain the popularity of Fianna Fail? Is the dismal state of Irish politics not proof that we are not logical? Doesn’t the continual election of Michael Lowry, despite being proved guilty of corruption, not contradict the idea that we are rational? One of my local councillors, Michael “Stroke” Fahey was sent to prison for a year for corruption. At the next local election he topped the poll with an increased number of votes. How can this happen and it still be claimed that we are rational logical utility maximisers with perfect information?
Assuming people are rational is assuming people behave the way they should rather than the way they actually do. If economics is to be relevant to the real world it must drop the pretence that people are always logical and rational utility maximisers, and instead realise that we do a lot of things that don’t make sense and some that are downright daft.