People Are Not Rational

The main complaint about the field of economics, at least libertarian economics, is that it starts with assumptions not based in reality. The number of references to “rational behavior” or “rational actors” indicates the people into these subjects are powered by wishful thinking, rather than clear-eyed realism. Humans, alone or in groups, are not rational. People regularly act irrationally, even when the rational option is obvious. A good example is right here in this story on the supplement scams:

But surely consumers play some role in the rise of the vitamin industrial complex. Research about the ineffectiveness of vitamins, or worse, has been around since the 1940s, after all. “People over time and particularly people in the United States have been led to believe that vitamin and mineral supplements will make them healthier, and they’re looking for a magic pill,” Dr. Cynthia Mulrow, another of the Annals of Internal Medicine editorialists, tells Reuters.

And the “magic pill” habit may be hard to break, scathing editorial or no. For what it’s worth, here’s the pushback from the supplement trade group the Council for Responsible Nutrition:

The Annals of Internal Medicine editorial “demonstrates a close-minded, one-sided approach that attempts to dismiss even the proven benefits of vitamins and minerals,” says the group’s CEO, Steve Mister. “It’s a shame for consumers that the authors refuse to recognize the real-life need for vitamin and mineral supplementation, living in a fairy-tale world that makes the inaccurate assumption that we’re all eating healthy diets and getting everything we need from food alone.”

All those rational actors economists talk about will look at the mountain of studies on one hand and a collection of con-men on the other and believe the con-men, even though they sort of know they are being swindled. Facts and evidence will play no role. They want to believe. They will listen to goofy celebrities and TV airheads about whole food vitamins and be convinced this stuff is beneficial. The fact that these people are wholly unqualified to talk about any of this stuff will count for nothing.

It’s why much of libertarian economics is absurd. In the very general sense, sure, markets are rational in that they display preferences of the participants. But, there are few unadulterated markets and therefore few truly rational markets. That implicit irrationality is known by the participant, which alters their behavior. People are not moist robots, acting on a simply set of binary instructions. We may be controlled by our code, but it is vastly more complex that the simplified models that come for modern economics.