Men behaving badly

The article “The End of Rational Economics” had some fresh and inspiring insights on how to estimate the future of economics. Normally it is thought that on average, people act rationally and the invisible hand of economics will guide things in the end. Not always, but on average. Instead of this usual assumption Ariely (2009) suggests that we should begin to base our assumptions differently, according to behavioral economics. One reason for this replacement is the recent recession, where people did not really act rationally, even on average. Behavioral economics is based on the premise that human beings are fundamentally irrational, which is pretty much the opposite of the normal way of thinking.

The article also showed how easily people were lured to cheating. Actually, luring them wasn’t even that necessary, since it was natural (at least in minor issues) for most people to cheat. Rational thinking may actually have a different meaning than what we thought: could it be rational to cheat?

Behavioral economics has its advantages, but it is not clearly better compared to the other possible ways. The problem with behavioral economics is that it is almost every time complicated, has many features that need to be accounted for. Moreover, it takes time to implement the research properly. We also have to keep in mind that rational economics does not presume to be always right. In fact, the researchers pretty much know that they are almost always wrong. Their task is not really to be right. They are just making presumptions and giving some scenarios to consider in the future. These scenarios are important, albeit they would not end up being nowhere near the true happenings. In a way it is similar to predicting the weather: it is just a forecast, and it should be clear to people that the forecasts cannot be always right, it is always just estimation.

As mentioned in the article by Moisander and Valtonen (2011), it is obviously needed to have some amount of deeper understanding (as with behavioral economics), and not just look a list of numbers (maybe more like rational economics). World is a complicated place. Especially when doing a research on consumers if you look plain numbers and use the median as the one correct answer, you may totally miss out on why people like and use certain products. But we need those numbers too. They give some straight answers, which may not be correct, but it may be enough to give some guidelines and directions.