Does it make sense to consider people rational actors, in the economic sense?  Rational action, as I understand it, is defined as a person taking into account the costs and benefits and making decisions based on a comparison of the two that doesn’t put them at negative value.  People make “smart” decisions in that they choose things that benefit them given the costs.

However, I have also heard it stated that even people “being irrational” – as in, doing things for others at no apparent benefit to themselves – is still covered under the rational action premise.  Those people are gaining internalized benefit – happiness at helping others – that necessarily outweighs the costs of their action.

The issue I have with this latter philosophy is that it seems rather circular.  Here is an example: I am interested in a girl, but she is not interested in me but wants to be friends.  She comes to me for advice about another guy she likes, and I help get them together.  Is it rational in the sense above, that I am gaining benefit by helping my friends?  I believe so, but often not that outweighs the anguish of the moment.  People make decisions like these, putting themselves in a negative benefit situation now for some potential happiness down the line.  Does economics claim to be predictive in cases like this?  It seems foolish to think that without a detailed psychological analysis of the individuals in question, one can predict this apparently self-detrimental behavior.

I think humans are capable of being irrational locally (in the moment) to be rational in the extended sense.  By this, I mean that you can consciously (and sometimes unconsciously) take a local hit  – costs outweighing benefits – for a global increase in your happiness.  The best example of this in my experience is making oneself moderately unhappy (spending time ignoring one’s own needs and wants) to make a friend much happier.  One could imagine an even more extreme example, like asceticism – giving up worldly benefits for some potential intangible mental/spiritual benefit later.  For economics to be predictive, I believe it needs to incorporate the nature of extended rational action.