Economists Incorrectly Believe That People are not Rational

It is a phrase you often hear in economics, "People do not behave rationally".  For example, in one common study, a person is given a hundred dollars and is asked to share some of it with a second person; and if the second person accepts they both keep their share.  Economists say that the second person should accept any amount offered, because any money is better than no money.  So if the first person keeps $90 and gives the second person $10, a rational second person would accept this because $10 is better than no dollars.  But, unsurprisingly, most people will reject the ten dollar offer.  It is at this point that economists say 'people are not rational'.

But this claim is false.  People are rational.  The problem is that classical economics assume all value is expressed monetarily.  It is this assumption that is false.

There are forms of value other than monetary value that can't be converted to monetary value.  Two examples are 'social value' and 'intrinsic value'.  Social value is the value and influence a person has with other people.  Status, prestige, popularity, and influence, are social values that can't be exchanged for items of monetary value.  In other words, Tiger Woods can't sell his popularity to someone else in exchange for a ticket to the Oscars, but he might be able to use his popularity to obtain such a ticket, while continuing to retain his popularity.

When people make decisions, people consider the social value in addition to the economic value.  In some cases, the social value is worth more to a person than the economic value.  For example, a business may install a heater in the home of a poor person for free because the publicity they receive for the generous act is worth more to them than they money they made have received for the installation.  This is a rational action.

Capitalism is not concerned with the results of the decisions of the capitalists

Capitalism does not claim to provide the most efficient allocation of resources.  The sole claim of Capitalism is that the owners of the capital get to make the decisions.  The laborers do not get to make the decision, nor does royalty, nor does the government, and nor does the clergy.  Only owners of capital decide what to do with the capital, regardless of the beneficial or detrimental impact to society.

Moral Tribes - Valuable Insight - What Makes Some Pleasures Better Than Others - 8

I recently read Moral Tribes by Joshua Greene (https://www.amazon.com/Moral-Tribes-Emotion-Reason-Between/dp/0143126059).  It is a great book.  I recommend it to people seeking to understand how our societies my find ways to resolve moral differences.

One insight from the book I found interesting was the idea that some forms of pleasure are "better", or "higher forms of pleasure" than others.  And those that are better are those that help us more in the long term because they are building resources, such as friendships and intellect and wealth.  Drinking to excess alone is destroying resources like your health and wealth and therefore, while pleasurable "in the moment" is a lower form of pleasure.

Moral Tribes - Considering The Impact of Our Actions on our Psyche - 7

I recently read Moral Tribes by Joshua Greene (https://www.amazon.com/Moral-Tribes-Emotion-Reason-Between/dp/0143126059).  It is a great book.  I recommend it to people seeking to understand how our societies my find ways to resolve moral differences.

From page 114, I like and mostly agree with the assessment that the trolley dilemma discrepancies can be resolved by recognizing the differences between our emotional and logic minds.  But it may also be that emotional argument against pushing a person is better than the logical argument for not pushing the person because, try as psychologists might, you can't separate a human from their environment.  Behavior isn't totally isolated.  A human has to live with their choices.  Even when made clear that there are no other alternatives for saving the life of the five and there is no way pushing the man can fail to save the five, there are ramifications to the action.  Perhaps after I push the man in front of the trolley killing him to save the five, I go home and commit suicide or become homicidal and kill ten people because I can't live with what I had done.  I don't think this factor ("How am I going to cope with myself after doing this awful deed") can be removed from the experiment.  It may be part of the logical algorithm to consider the emotional impact of the action on the actor.  

Even actions we take within games affect our neural pathways and thus how we live our real lives.  Our actions within a video game, or thus (perhaps to a lesser degree) in a thought experiment, can impact our lives going forward (https://www.center4research.org/violent-video-games-can-increase-aggression)