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Market: participants freely exchange goods Rational: subject acts according to their own utility function Freely acting is equivalent to rationally acting, wh

Market: participants freely exchange goods Rational: subject acts according to their own utility function Freely acting is equivalent to rationally acting, which is precisely where markets can exist. E: Downmod without leaving a comment. Classic HN.

civilian 10y ago
Not a downvoter, but: Freely acting != rational acting. People often take actions on bad information, or on bad analysis of good information.
- jsprogrammer 10y ago
  I guess the problem is that I'm the only one in this discussion that has offered a definition of rational. Taking action on bad information or analysis may be rational for some utility functions.
  - civilian 10y ago
    Yeah, I was thinking about that after I wrote my comment. I suppose that rational could just be defined as "what a person does", since they must have been trying to optimize for _something_. But there must be some universal optimial for a given utility function, right? Like: choosing to buy a BMW when your utility function is a looking for a cheap car is just simply irrational or a mistake. Here's a good one: All of my high school teachers (and my parents) encouraged me to study biochemistry in college. They assured me there'd be a good career for me afterwards. But they were kinda wrong, and I had executed my utility function (what's a major that will give me interesting and good work) on bad input. I acted rationally, but would you say that my decision was a rational one?
    - jsprogrammer 10y ago
      It was rational because you valued what your teachers and parents thought. All value is subjective, so you cannot define a universal optimum. To say whether something was a rational decision requires evaluating the subject's utility function at the time of the decision. This is something only the subject can do. Trying to judge something after the fact is very difficult. What good input could you have used when you made the decision (or while you continued to execute it)? Making mistakes in reasoning and/or lacking information that would allow for making a decision at a higher perceived utility does not make one irrational. An irrational decision is one where an action determined to have the most utility is not taken.

civilian 10y ago

Not a downvoter, but: Freely acting != rational acting. People often take actions on bad information, or on bad analysis of good information.

jsprogrammer 10y ago
I guess the problem is that I'm the only one in this discussion that has offered a definition of rational. Taking action on bad information or analysis may be rational for some utility functions.
- civilian 10y ago
  Yeah, I was thinking about that after I wrote my comment. I suppose that rational could just be defined as "what a person does", since they must have been trying to optimize for _something_. But there must be some universal optimial for a given utility function, right? Like: choosing to buy a BMW when your utility function is a looking for a cheap car is just simply irrational or a mistake. Here's a good one: All of my high school teachers (and my parents) encouraged me to study biochemistry in college. They assured me there'd be a good career for me afterwards. But they were kinda wrong, and I had executed my utility function (what's a major that will give me interesting and good work) on bad input. I acted rationally, but would you say that my decision was a rational one?
  - jsprogrammer 10y ago
    It was rational because you valued what your teachers and parents thought. All value is subjective, so you cannot define a universal optimum. To say whether something was a rational decision requires evaluating the subject's utility function at the time of the decision. This is something only the subject can do. Trying to judge something after the fact is very difficult. What good input could you have used when you made the decision (or while you continued to execute it)? Making mistakes in reasoning and/or lacking information that would allow for making a decision at a higher perceived utility does not make one irrational. An irrational decision is one where an action determined to have the most utility is not taken.