Rationality Assumption: "Homo Economicus" (Ch 1)


The rationality assumptions economists make, explained. chapter one
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Rationality Assumption: "Homo Economicus" (Ch 1)
  1. 3 rationality assumptions:
    1. 1. people are interested only in their own satisfaction
      1. 2. choices always align with long-term interests
        1. 3. people can consider every choice
    2. you don't make yourself worse off on purpose
      1. there's SO many ways to be irrational; only ONE way to be rational
        1. studying rationality gives baseline- can easily notice deviation from baseline
          1. economics is focused on outcomes rather than thought process
      2. bounded rationality: people are nearly rational; sometimes break from the 3 rationality assumptions; people use rules of thumb instead of considering all choices
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