Of rational and rationalizing actors

rationalization hamsterA central foundation of economics as a field is the rational actor. Homo Econonomicus as it is called is an abstraction that makes much of economic theory possible, through the assumption that humans logically weigh options, utilizing concepts such as marginal utility, taking into account sunk costs and opportunity costs, and countless other principles that together construct the theoretical framework of economics. The homo economicus has no preferences, no bias, make no flaws in their logic and has perfect information. The interesting part of this is that marketing (a sub-field of economics) and economics are at odds, because if humans truly were rational actors, then marketing should have little value outside of being the source of the perfect information. However, if we take a look at marketing, it becomes clear that in marketing informing is a means to an end, the end being persuasion and influence. The model used in economics is one of needs and wants, where a need is a biological urge that needs to be sated and a want is the preferred manner in sating that urge. For instance, thirst is a need, preferring green tea is a want. If the human in question was a rational actor, the way to make such a decision was to weigh all the drink choices, and then make a choice based on the relative merits of each beverage option. These merits could include such categories as flavor preferences, health benefits, health detriments and so on, and thereafter a choice could be made. Continue reading