More on rationality

Posted by: Michael Mandel on October 11

Here’s a link to a new piece that I wrote on the Nobel Prize:

I like rationality as much as the next person. When I was in high school in Brooklyn in the 1970s, I laboriously worked my way through a thick book called Theory of Games and Economic Behavior, the founding bible of game theory (yes, I was an odd kid). It had chapter titles like “Qualitative Discussion of the Problem of Rational Behavior” and “The Symmetric Five-Person Game.” A decade later, I used game theory in my doctoral dissertation.

For the rest of the piece, go here.

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Reader Comments

Lord

October 12, 2005 02:16 PM

I really think there is no such beast as 'rationality'. There may be rationality in retrospect. There may be rationality in the context of a theory and set of assumptions, but absent such, I do not believe rationality exists with respect to future events. And if the theory or assumptions are incorrect, rational can still be wrong. As theory and assumptions can change, what is rational can change and does change all the time.

Fatiha Jillali

November 28, 2005 02:03 AM

"Desperately Seeking Rational Homo Economicus"

The French Chemist Lavoisier said: "Rien ne se perd, rien ne se crée, tout se transforme." (Nothing is born or perishes, but already existing things combine, then separate anew)

If we as persons can push back the borders of our limitations and constantly improve our wellbeing through technological progress, it is a quite different story for that sphere called Earth. Natural resources that are critical to sustain life, like drinking water and breathable air are limited and are being depleted day by day. The same applies to other resources like oil. A Chevron commercial goes: “The world consumes 2 barrels of oil for every barrel discovered. Is this something you should be worried about?”
I say: Yes!

Governments’ avoidance to address the world’s fossil fuel addiction is pathetic. Throughout history, revolutionary progress was only accomplished at the expense of a major disruption of the existing structures. Sooner or later the ostrich attitude must come to an end and a clear push for a definite switch to renewable sources of energy on a large scale has to happen.

Classic economics advocates that the limits of growth are a non-issue. Specifically arguing that the depletion of natural resources is factored in economic projections and therefore will miraculously be taken care of by the market self-adjusting mechanisms.
I don’t subscribe to this point of view- like a certain Sting would say.
I think that Homo Economicus is predominantly irrational and I will use a simple analogy to illustrate my claim:
When a consumed resource is endangered, the value Human beings derive from it, increases exponentially, effectively driving the whole resource to extinction. It’s the “Gotta rush to get it before it’s all gone” attitude.
Ironically, to animals, the intrinsic value of the resources they consume when they happen to be in danger of extinction, drops significantly; effectively and instinctively letting the scarce resource go into biological rest by not consuming it until it rebuilds sufficient reserves.
Animal behaviors would be more sustainable than ours?

A new scientific discipline called bio-mimicry preaches to observe sophisticated animal substances and replicate their production process in industrial applications. For example scientists would study how the spider fabricates - with no toxic waste - a web that is pound for pound stronger than steel.
What I would personally advise though is to extend the mimicry to behaviors not just products.
The dashed lines we see on maps that some call borders, only exist on paper. In reality air and water are connected throughout the Globe and there is no known way to seal a country such that its natural resources are protected from toxic foreign influences. Take a catastrophe like Chernobyl for instance; it was just a matter of hours before the radioactive clouds spread across neighboring countries. In summary no matter which country enjoys the cigarette, the whole world will share the passive smoke.

Consider how the frequency of category 4 and 5 hurricanes has doubled in the past 35 years. The human induced climate change is actually happening and its effects are “democratically” spread throughout the world. Two weights, one scale: Rich and poor face equal odds to endure it, granted of course the former are better equipped to survive it.
In a world where some die of hunger; others of obesity, it is natural yet utopist to demand a redistribution of wealth. A practical solution though would be to find new ways of creation of wealth to lift the world’s neediest from chronic poverty to sustained decent living and set them free from foreign aid and subsidies.

I am a citizen of a developing African country and I am a die hard believer that base of the pyramid sustainable technologies coupled with micro-financing can bring about lasting change.

I might be biased. That being said, I am still desperately seeking rational Homo Economicus…

Fatiha Jillali | The Johnson School at Cornell University | MBA 2006 | Email: fj29@cornell.edu

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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