Behavioral Economics: Several Commentaries on Rationality and Irrationality

Abstract:

The purpose of this paper is to examine the concepts of rationality and irrationality in the context of behavioral economics. The author distinguishes five alternative definitions of rationality, which one can find out in the modern economic and psychological literature. Their multiplicity may result in serious confusions and misinterpretations. Using optic illusions as a reference point, I show a tendency of behavioral economists to abuse various manipulative techniques. As a result, bounded rationality of ordinary people often turns out to be for them as a subject of intellectual exploitation rather than a subject of scientific investigation. The paper provides also a comparative analysis of two major research programmes in decision-making theory — behavioral economics (D. Kahneman, A. Tversky, R. Thaler) and ecological rationality school (G. Gigerenzer and his co-authors). The author concludes that the first program is substantially overestimated while the second one is substantially underestimated.