IV.  RATIONALITY

In economics we assume that individuals act rationally.  We must be careful about how we define this, however.  It only means that individuals act with purpose.  People, for the most part choose to do the things they do.  Sometimes people may behave randomly, but random behavior is not predictable, only purposeful behavior is predictable.  By rational we mean that people act with least cost, effort, and waste to achieve their goals, within their knowledge. 

This does not mean that people are assume to not make mistakes, only that they learn from their mistakes.  If I my goal is simply to go to New Orleans from Thibodaux, going there by mailing yourself in a huge box, would be a most inefficient way to get there.  Driving, hitchhiking, even biking, are all more efficient ways to get to New Orleans.  [By the way, remember that the goal of getting to New Orleans is not questioned in the economist's view of rationality.] 

The assumption of rational behavior does not rule out the behavior of the insane.  Some people think that they are Napoleon, and so it would not be irrational (according to our definition) for them to act as they think Napoleon would, to have goals they think Napoleon would have.  Others decide to kill themselves.  We may think of suicide as irrational (but most suicides are from people who have painful, terminal illnesses and decide to end their suffering).  Rationality, we must remember is about the means we choose to achieve our goals, NOT about the goals we choose.  Irrational suicide would be suicide by sticking your head in the refrigerator instead of the oven.  It would take a very long time for one to die in this manner.  A most inefficient way to do away with oneself.

                                                              
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