I once had a economics professor who contested that the fundamental breakdown of Rational Expectations theory was that, "People are Stupid!". It appears the Oregon State Legislature agrees. Do we really need the state to protect us from this garbage? Maybe I should ask Senator Maria Carter (D-Portland).
posted by wormwood at 11:37 AM
3 Comments:
If you are stupid, you can still be rational in a sense. I believe I would rather be thought of a irrational than stupid, although the result is often the same.
Ahh... But if you are stupid, as an economic agent, are you capable of using all available information to make "rational" decisions that maximize your personal "utility"?
You may be rational while failing to fully understand the implications of your actions. In other words, you can make a rational decision within your limitations for processing info (stupidity) or lack of knowledge (ignorance). I think of insanity as one of the few truly irrational conditions.
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