Thinking rationally

I am happy to see that the EdExcel specification puts the neo-classical assumption that men is rational to question. My textbook mentions three reasons why men may not behave rational: social norms, habits1, and weak computational skills. It does not cover that people may not end up with a rational decision because of empathetic considerations.

I am not sure why this is. It may be, because empathetic behaviour is not irrational. A society where people are more empathetic towards the needs of others might be more equal, and a more equal society might have less criminality, healthier civilians, less violence, and better educated people2. Therefore showing some consideration for the impact of one’s behaviour on others, might contribute to the enjoyableness of society.

The neo-classical assumption is under scrutiny from behavioural economics. Findings from that branch of economics make clear that people in general do not behave rationally. Insights that find their way in the marketing toolkit of companies. It also calls into question the validity of models based on the rational man assumption.

Although I think this is an important discussion, I want to flip that coin around: Since we have accessed that people are not as rational as some economists like to think, should we not do something about that? Should we not help students understand how the can be – and are – manipulated so they can harness themselves against it? Should we not improve our students computational skills and information skills so they are better able to interpret data? What role can comparison sites play in making comparing complex products less difficult? And what role can governments play in standardisation of products and requirements for product information?

How to use this in your lesson

Integrate computational skills as much as possible in your lessons. I like to move from the abstract to the concrete by using numerical examples as much as I can.

Use the distinction between possitive and normative statements throughout your lessons.

Give students an assignment to compare different mobile phone providers. Let them organise the information they gathered in such a way that it improves comparability. You could do the same for any complex product, like an insurance or rental appartment.

Use one of Daniel Ariely’s books for anecdotal examples from behavioural economics.3

  1. Habits in a broad sense. The description in my textbook is in line with ‘system 1’ as coined by Daniel Kahneman in his book Thinking, Fast and Slow.
  2. As is shown from research by Richard Wilkinson and Kate Pickett on the correlation between inequality and social indicators like the ones mentioned above. They wrote about their findings in their book The Spirit Level, Why Equality is Better for Everyone.
  3. I like one example from Predictably Irrational: test persons were asked to choose from three subscriptions to the Economist: Internet-only $ 59, Print-only $ 125, and Print-and-Internet $125. What would you choose? I chose the first option, predominantly because I dreaded taking the out-dated magazines to the household waste site. I set my husband down at the kitchen-table and he was positive: of course the best choice was Print-and Internet. However, when I presented him with only two options, Internet-only and Print-and-Internet, he chose Internet-only. This was exactly what Ariely’s findings were. He explained that this behaviour resulted from a decoy – the Print-only option in this case.