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.