Learning by Proxy by Vivek Srinivasan

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Human Rationality

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Human Rationality

Human decision making is mired in all kinds of processes, rationality is only part of it, not the entirety of it as economics assumes.

Vivek Srinivasan
Nov 16, 2021
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Human Rationality

blog.viveksrinivasan.com

In mathematics, the transitive law states:

x>y and y>z then it implies x>z

The trouble with humans is that when it comes to making choices, they are not transitive at all!

If you prefer coffee over tea and you prefer tea over hot chocolate does not imply that you would prefer coffee over hot chocolate. Psychologists have conducted similar experiments with mate selection and other such areas of human choice to prove quite conclusively that human choice is not transitive. This implies also that human choice is much less rational than you would think it is. 

The entire discipline of economics is based on the assumption that humans are rational beings. Time and again though, our own choices show that we are not rational at all. Even so, we continue to use economics as the bedrock of financial planning for governments policies.

It is time to reconsider the art of Economics and re-write the very fundamentals of it.

On that note, I was recently reading about Amos Tversky, I read;

He worked with an economics professor who was always telling him how stupid someone or the other in the university was. Amos quipped, your subject assumes human rationality and yet you only seem to come across stupid people.

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Human Rationality

blog.viveksrinivasan.com
1 Comment
Anil Kumar Siddu
Writes Anil’s Substack
Nov 22, 2021

Well, Humans want what they don't need.

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