"Consumers routinely make such short-term economically irrational decisions."

Liberal arrogance (and ignorance) truly knows no bounds!

As any college freshman could happily inform you, there is no such thing as an "economically irrational" decision. Every consumer marketplace decision is, by definition, rational, in that it produces the greatest possible marginal utility for that particular consumer. We as individuals may disagree over utility (people disagree about what they find most pleasurable), but it is a fallacy of progressive thought to conclude that because consumer A shops differently than you, consumer A is "wrong" or "acting irrationally."

In this case, consumers simply place more value on the immediate cost savings of traditional incandescent bulbs than on the long-term savings of CFL's. And they may have a point: the opportunity cost of paying twice as much for lightbulbs in exchange for, say, a savings of ten cents a month over three years is the potential return on an investment of the price difference. If you could earn more in compound interest over those three years than the amount saved on your utility bill, maybe you're the one acting irrationally after all.

But fortunately for you, I wouldn't presume to judge. I'm not a liberal.

"According to a calculator on Wal-Mart's Web site, replacing 30 incandescent bulbs with CFLs can save more than $1,000 over the life of the bulbs—real money for a Wal-Mart shopper. At Wal-Mart, CFLs are cheap: A six-pack of 26-watt GE CFL bulbs goes for $15.16."

Think you can turn $75 into $1,000 in four years? A 90% rate of return? That sounds... irrational.

He noted "irrational exhuberance" in the marketplace. According to you, that apparently doesn't exist and could only be imagined by liberals.

"Irrational exhuberance" refers to a state of mind, not to choices being made in the marketplace. The choices were rational; the belief that such choices (buying at any price)could be sustained forever was not. And, ultimately, they were not: we had a sell-off in 2001. That sell-off was no more or less rational than the buy-off that preceded it.

Reading comprehension can be fun!

We trust a Wal Mart calculator when the margins on a CFL are sifnifigantly higher than the margins of floor-priced incandescents? Wal Mart has an obvious incentive to encourage consumers to buy CFL's over incandescents. Duh.

This calculator is hopelessly simplified and idealized and could not hope to approximate the true costs of choosing one bulb over another. Once again, there must be more to the equation than suggested, or buyers simply would not buy anything but CFL's. The cop-out "buyers are just stupid and irrational and should be told what to do by smarter bureacrats, like me and people like me" is just that: a fallacious cop-out. It is nonsensible.

So you are saying that the choices made by the participants did not reflect their state of mind at the time. Wouldn't that be, ummm, irrational?

Beyond a certain point, things lasting longer may not make sense economically. For example, suppose I expect to move from this house to another one in approximately 3 years. Unless either (a) I plan to swap out the long-lasting bulbs for the cheapest ones I can find at that point, or (b) having longer-lasting light bulbs is a selling point for the house, then (for the light fixtures in the house, not table lamps that I'd take with) the calculation I need to make is how much I'd spend on incandescents versus fluorescent over three years. You could give me a light bulb that would last 10 years, and if it's going into a ceiling light, 7 of those years have no economic impact on me.

Or let's say that you've got a lamp that's always getting knocked over by baseballs in the house. (I wouldn't let anyone throw things in my house, but for the sake of argument, let's just imagine it.) You wouldn't buy an expensive bulb for that lamp because the bulb would get broken long, long before it actually burns out.

Or, let's assume that someone is poor. The fact that something will pay off in time doesn't change the fact that they may not have that money right now. Pay more for a light bulb that will reduce electric bills over time and skip a day's meals, or buy the cheap one that ultimately costs more and actually get something to eat today? I don't think that you could fault someone for deciding on the cheap alternative.

There could be very rational reasons, economically, to choose a cheaper product right now, rather than an expensive one that will last longer. We can't necessarily assume that people are being irrational. Some undoubtedly are - but not all of them.

No, I am saying the choices made by the participants were rational given the information and beliefs available and held at the time.

At this risk of running off topic, allow me to explain something rather elementary to you:

Beliefs are ideas held in the affirmative. An idea can have either truth value (truth or false). A false idea held in the affirmative is said to be an irrational belief. Nonethess, the belief is still held as true, and often substantiation of its truth value is impossible given causal uncertainty (cause and effect are only obvious upon observation - that is to say, it is impossible to predict the future, as shown most famously by Schroedinger). So, when a person acts upon beliefs which he holds to be true, his actions are rational (even as those beliefs may be suggested or later even shown to be irrational). The actions are relative to the beliefs and dependent upon the believer, and thus are said to be subjective. As long as the actor is acting in the interests of his maximum satisfaction given the resources and information available at a given point in time, he is said to be acting rationally, even if the beliefs which motivate those actions are false or irrational. Further, all market actions are known to be rational, by virtue of the second Law of Economics (all things being equal, individuals will make those choices which maximize marginal utility).

When Greenspan claimed the belief that the market was going to continue to go up in the short-term was irrational ("irrational exhuberance"), he was attacking an idea with uncertain truth value. So, Greenspan would have been said to be acting rationally for not buying Google stock in 2000. However, someone else could have believed the opposite, and that person would have been acting rationally when buying Yahoo stock in 2000. Neither believe was certain at the time (though one could have been said to be stronger than another). Only in hindsight is one apparently true, and another apparently false. This motivates future rational reaction by both Greenspan and the Yahoo stock buyer.

Now, we could reasonably argue that the benefits of CFL ownership outweigh the benefits of icandescent bulb ownership. That is fine. However, we cannot dismiss our idelogical adversaries (those who argue the opposite) as "irrational" and/or "stupid." This is fallacious reasoning, and those who partake in it are dangerous and ultimately want only to manipulate and to control, and do not trust the intrinsic strength of their own arguments enough to avoid emotional appeals. Icandescent bulb buyers are acting rationally based on differences of belief (and those differences mean they derive more utility from buying incandescents even as you derive more utility from buying CFL's). Maybe tomorrow one belief will shown to be stronger than another, but that doesn't change the prevailing facts (actions are taken in a temporal bubble, with scarce resources and scarce information). And you don't know with a certainty the totality of circumstances behind a given light bulb purchase, nor how those circumstances might change over time. So you cannot know now who will have believed correctly tomorrow.

Consider the heaven's gate cult. The cultists were acting rationally when they drank the Kool Aid, given their thoughts and beliefs. We are were acting rationally when we didn't drink the Kool Aid, given our thoughts and beliefs. But ultimately, no one really knows whether they or us was "correct" (with absolute certainty), even though one of us is, in fact, right and the other of us wrong.

I hope that was clear enough for you.

As I understand you, you are stating that a woman who jumps off a roof has made a rational decision because, having weighed the evidence available to her - whether that evidence is objectively correct or not - she has made the decision which most completely fills her needs at the time. I am not sure what your argument has achieved other than to make the term "rational" much less useful.

I realize you started this thread by refering specifically to economic rationalism, but since jumping off a roof often seems, upon investigation, to have been an economically motivated decision, I think the example is reasonable.

with the definition of "rational" and "irrational".

The Heaven's Gate cultists were actively disregarding a world of disconfirmatory information when they drank the kool-aid. They were coerced into disregarding this information because of appeals to emotion - they sacrificed their critical thinking in the service of maintaining affiliation (a forced choice characteristic of cults, among others).

The law you mention in economics is an assumption - a decision to frame behavior in a certain way, not a verifiable assertion.

From your definition, any psychotic accused of a crime would be found rational, because they were responding to things they considered true.

Maybe you ought to rethink that a little.

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Yes, wasn't that self-evident when he originally made his claim? Everybody here appears to be sidestepping his point in order to attack it because ultimately what he is stating makes sense and they don't like it.

He's not playing fast and loose with anything and you are placing your definition of rational upon others.

Eigenvector:

He's not playing fast and loose with anything and you are placing your definition of rational upon others.

Ok. So how would you define rationality? Irrationality?

The definition(s) I'm referring to are the accepted legal/psychiatric/popular ones. Praytell, which definition are you referring to?

Are you really saying that the Heaven's Gate cult members were rational? On what basis could you make such a claim?

Let's say I sell all my belongings, including the clothes I am wearing, and buy a donkey. Then I get braces for my donkey. Then I enroll my donkey in law school. One could make the case that all of those actions would be purely financial. But it does beg the question: Is my support for a future donkey attorney with braces, even as I starve to death, naked, outdoors, in the dark, dehydrated, is it rational?

Rational is commonly understood to mean reasonable. Certainly, if these examples are rational, nothing is irrational.

Of course, Daniel Gross failed to make his point about irrationality, which is something that EngineerGirl took care of in an earlier post. Clearly there must be a difference between: a) saying that a person could have sound reasons for doing something (even if Gross doesn't stop to list them), and b) saying that any reason one has for doing something is rational, and thus any action is rational. If there's something else you and talk2farley were trying to say, I'd like to know what it is.