Geography 3422A/B Study Guide - Gary Becker, Irrational Exuberance, Rationality
17 Sep 2012
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When it comes to money, people can make irrational decisions. Gary becker principle of economics and rationality. Adam smith people working in their self interest could coordinate in markets and create positive outcomes: individuals behaving rationally creates an invisible hand, people generally try to benefit themselves. Consumer behaviour model we never buy anything until we have weighted the cost to our benefit: people behave as if they are constantly calculating benefits, idea is to keep regulation and government interference to a minimum. Global economy comes to a halt in 2008: had the power to cause great consequences, economics didn"t see it coming, couldn"t predict it. Or do emotions come into play: rational model person should never pay over for a bill, emotional model the emotional desire to win that pulls the bid over what the item is actual worth. Desires for quick rewards today, trumps rational decisions. Emotions can influence peoples opinions of prices.
