Homer's rationality

Last year, that I have started studying for my PhD, the initial bibliography that I was reading was on strategic management and finance topics. In order for me to get the full picture of what I was reading I had to go back and start from the beginning  During the 70s and the 80s the main idea was that people in general, basically act in a rational way. 

Well, what does rationality mean then? On general terms,

it means that the average next door guy (take Home Simpson for example) 

will take every day decisions that will be for his best economic interest. So, when Homer decides what job he will do for a leaving or what kind of food he will eat 

or what kind of investment scheme he will go for, he must be thinking kind like a robot or like an excel 

spreadsheet. He must add up all the pros of a decision then add up all the cons of the decision, 

then think again about any potential alternatives and finally reach a point that he will be sure that he is getting the best of what he wants (food, car, house etc.) and on the same time he is paying the most reasonable price.

Let's assume for a while that this procedure, while it seems a bit long, does actually happens in our minds before we do or buy something. But do we always act in our best interest and try to be better off in money terms as it suggested? I mean we do also impulsive things right? I suspect you have found yourself in  a H&M or Top Shop store and you just picked up and bought a T-shirt just because you liked and the price was fair. You did not really think about the potential alternatives of all the other T-shirts that were sold in your area.

So does that make you irrational? Do we always act in our best economic interest?

Lately, there are quite a lot of scholars that started not to be so sure about how rational we act. Take for example finance. Dr. Barberis recently presented the idea that even when we consider the stock markets that so many smart guys work there we can actually find stupid behaviors, or to put it more gently, not so rational behaviors. The reason for that, is that all of us do have a personality that consists of positive and negative characteristics. We do not interact with the others just on numeric terms. We do have emotions and feelings that are interpreted in needs. Probably, we do try to be better off on a constant basis but not just through the maximization of our monetary profitability.

P.S. The video following is from Yoram Bauman (aka Stand - up economist). The guy is trying to interpret the 10 economic principles of Mankiw where rationality is included. I laughed quite a lot I have to admit. More of his videos can be found in http://standupeconomist.com/.

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