In my space, we refer to some things as "portable" or "non-portable" which has very specific intent, which doesn't relate to if you can pick them up or not. I think loan-words which have close analogies in a few minds rapidly diverge.
So a "rational" actor in economics seem (to me at least) to mean the typical selfish bastard who only acts to maximise their own profit outcome, no matter how its defined, and excludes a green warrior buying a good or chattel to NOT use it, or somebody buying it to give to charity, or buying it to round up another charge to get north of a shipping fee but its a nonce purchase and has no intent or purpose..
its a narrow, domain-specific meaning. I think that word doesn't mean what you think it means inconceivable
That's not true at all. Rational is defined as someone acting to maximise their utility (roughly satisfaction), which is capable of encompassing "a green warrior buying a good or chattel to NOT use it, or somebody buying it to give to charity, or buying it to round up another charge to get north of a shipping fee but its a nonce purchase and has no intent or purpose" perfectly fine.
This also leads to another concept of “Malice” which would be the positive utility you get from others losing utility.
The crux to me is that often utility is talked about as only what you intrinsically get. Doing selfless things isn’t without benefit, it’s just without direct benefit and I have seen little ability to quantify it in economic terms.
Wouldn't altruism be getting no satisfaction from increasing someone else's utility but doing it anyways?
head explodes
Family, tribe, nation, race, world, humanity, sentience.
This is completely unrelated to what economics means by referring to a rational actor. A rational actor is just one who, given a choice, will take the action that produces the all-inclusive result they most prefer. You're talking about someone whose only preference is having the greatest amount of money, but economics contemplates all possible preference sets, which is why it measures benefit in "utils".
Let me ask you a question. Do you think the word "rational" in rational actor, rational investor and rational market, has exactly the same meaning? Do you think as people commonly understand these terms (I don't mean economists) the answer would be the same?
Do you even mean this as a serious argument? Can your favorite field survive politician's (politician, from "polis", city, and "-tician", "person": 1. professional liar 2. scumbag 3. one who professionally holds office) handling of their terminology?
Nor can I find it a terribly serious argument that "common people", i.e., people who aren't in the field and don't know the definition, don't know the definition. That's just shy of begging the question, except there's a small sliver of people "in the field" who don't yet know the definitions, called students.
I'm trying my best to unpack your words into some sort of actual argument but I can't find it.
I know you didn't really mean this, but polit/ic/ian -- "polit" is from polis, city; "ic" is a Greek adjective-forming element; and "an" or here "ian" is a Latin adjective-forming element. "Polit" is the only part of the word that bears any semantics (in the etymology). The Greek root for person would be "anthrop", which isn't present.
(The root for "man", an adult male, is "andr", which is why it's so hilarious to Italians that English speakers think Andrea is a girl's name.)
Rational actor and rational investor, the same. Rational market, different. But I only know the term "rational market" through its use in the fixed expression "the market can stay irrational longer than you can stay solvent".
> Do you think as people commonly understand these terms (I don't mean economists) the answer would be the same?
I guess I can't really speak to this.
Ultimately, rational is supposed to mean reasoned, not optimal. Heuristics can be rational if applied with reason and devised with good valid reasoning.
The other thing is that the limited situations which psychologists/economists measure people in are very artificial, and there's no reason for people to ace the experimenter's metric.
Responding to grandparent: It's not just that project are efficient and not quite correct -- they're probably more correct and scientists have no way to tell.
"If you judge a fish by it's ability to climb trees, it will live it's whole life thinking it is stupid."
Have a set of "irrational actions"? Add in information and computational constraints and the necessity for heuristics, the exact right kind of risk-aversion / novelty-seeking behavior, (or play with the second or higher derivatives of your utility function), add in social dynamics like signaling, repeated games (or incorporate mental burdens that negate the impact of repeated games) etc. There exists some formalized universe where your agent is indeed rational.
Well, a rational actor works to maximise their personal preferences effectively. You've accidentally slipped an assumption in that all people are fundamentally typical selfish bastard's with a corresponding set of preferences, but I suspect you don't actually assume that personally because of the invoking of green warriors.
A green warrior or charitable giver is still a rational actor, and adequately modeled as a normal source of demand. It just happens they need to be acting rationally in context of a larger system to themselves or basic law-of-the-jungle style effect will optimise them out. Green warriors themselves often talk about preserving the planet so people can live on it, which is clearly a personally rational goal. Charitable people will often say similar things.
(I have a great picture of Claude Shannon's hand holding a literal mechanical mouse: not a modern computer mouse, a simple robot mouse he built do do maze-solving. I wish I could find it, its such a nice example of dropping words and names into another context: "Claude Shannon's mechanical mouse" means probably something completely different to what many people think. https://www.google.com/search?q=claude+shannons+mechanical+m... shows things I think it was taken from. Its a kids book on computing from the 1960s)
I think you're missing the value in finding that some things are irrational. Of course no one assumes people make perfect decisions 100% of the time, and of course there are cases where making the better decisions isn't worth it - but it's incredibly useful to know in which cases people usually make "wrong" decisions, in order to, when necessary, find antidotes. Wrong is a synonym for irrational here, and is a placeholder for "contrary to what the person would have chosen to do, had they had all the information".
Take the "planning fallacy" - a pretty well known bias in which people underestimate how long things projects will take. Knowing that it exists is what leads people who want to get the correct answer to use "tricks" to get a more real answer (like taking the so-called "outside view", and estimating how long a project will take based on how long similar projects took in the past).
Actually, a lot of economists assume exactly that, call it "revealed preference"[0] and then claim that people are lying when they complain about it.
A bias, on the other hand, is if we ask sometime if you want to eat 2 or 3 donuts, and you answer 2, but then after further studies, we see that the amount you eat depends on, say, the size of the plate in front of you, then we know that there's something influencing your decision which you may not be aware of and which theoretically speaking "shouldn't" influence your decision.
Revealed preferences don't mean that everyone makes perfect decisions all the time. It just means that, if you want to find out what people actually want, then the best way to do it is to observe what they actually do.
That is, given a revealed preference and someone claiming they've identified a bias, I start from the presumption the revealed preference is actually rational and the explanation of the bias is wrong, because, well, the article is clearly correct. I see it online all the time. There's a bias bias, the presumption that if someone explains why something is biased, that's it, case closed, no further analysis needed. I see that bias in myself. It's hard to overcome, which is why I (try to) start by presuming the revealed preference is correct.
People's explanations of their revealed preferences are, by contrast, hot steaming garbage. People are terrible at explaining their reasons. So terrible that I think it actually plays into bias bias, because if you take people's explanations seriously they sound incredibly irrational, so it's merely a matter of trying to explain their irrationality. It seems so fruitful. But while studying patterns in rationalization is probably an interesting topic of its own, studying rationalization shouldn't be confused for studying what people do. In general, I (try to) start out by discarding someone's claimed reasons for doing something, unless they do a very good job of convincing me they're actually good at introspection and have made an at least halfway serious attempt at it.
People are complex psychological creatures and this whole issues of irrational or rational behavior is compounded by the fact that people can /learn/ system 2 patterns of thinking so well that they become system 1 patterns. Those are essentially habits.
So with your rational mind, it is worth identifying any biases you want to codify in your system 1 brain to minimize cognitive costs. But that's an option. And I think we have that option because there is a giant tradeoff between spending time and energy thinking versus getting a good enough result (out of the many decisions and processes we have to carry out each day).
(With respect to the planning fallacy, I suppose there are benefits to underestimating the time it will take. If projects are really much harder than expected, it may never be emotionally worth starting them because they are too monumental. So we have a bias that makes us more optimistic so we actually start doing stuff which helps us in the long run. What I mean is that you can spin it as a good thing. It may be a wrong intellectual assessment, and sometimes that matters immensely, but it is also quite possibly rational for humans to have this bias because it helps them get more stuff done. I'm not a behavior economists or a psychologist, to be fair.)
The closest that I recall is representing strategies with finite state machine and having a preference for strategies requiring fewer states. A main difficulty there is mapping strategies to FSA.
Read: "unwilling to sacrifice theoretical purity in order to build actually realistic models"
The capacity to make rational decisions is a limited resource, so making locally slightly irrational decisions is, globally, the rational strategy. There's a number of predictable ways we make locally irrational decisions, though, and there's a lot of value to be extracted from studying those.
But then there are emotional biases, for example the loss aversion bias. Investors tend to hold on to their losing investments to avoid realizing a loss and sell their winning investments to lock in a profit. This is irrational - investors achieve subpar returns because of this - and often cannot be resolved with education.
Accounting for cognitive or longterm costs - using the concept of bounded rationality - would not make emotional biases disappear or make them invalid.
In agreement, the cognitive cost of being rational all the time is too high, and is, after all is done, irrational.
You say, "Many times they are simply not accounting for cognitive or longterm costs." How do distinguish those times from the other times when a person is being rational?