<p>Psychological irrationality and economic irrationality are different.  In economic rationality, you have well-defined preferences, you know your budget constraints and if you can move to a higher utility then you can make a plan to do so.  So cutting yourself, if it makes you feel better as you are doing it, is rational.</p>
<p>Just a note, there are actual mathematical formulations for rationality under different conceptual structures but we are ignoring that here for a broad general discussion because there is something interesting to highlight in your question.</p>
<p>Let us define irrational as the logical negation of rational.</p>
<p>Let us negate the existence of well-defined preferences.  There are two ways to arrive at that point.  The first is to be a virgin.  Preferences cannot be defined without experiencing the alternatives.  The second is that there can be ill-defined preference structures such as rock-paper-scissors.</p>
<p>Now, if we negate not knowing our budget or other limitations, that implies a form of blindness or a loss of some form of perception as to reality.  It can be from losing track of information in a complex environment but in a simple environment, it would be much like dementia.  You could be 90 years old believing you are 20 years old and base your decisions on the realities of life when you were 20, even though that is now counterfactual.</p>
<p>Finally, you cannot work out what actions would take you to a higher utility.  That would imply some form of impaired cognitive ability or psychosis.  Even babies cry to get mom to come to feed them.  It would be the same as a baby that couldn't figure out how to get fed.</p>
<p>Now, as to your other question, would people with the experience of a positive welfare gain choose to take it?</p>
<p>It depends.</p>
<p>If there are many choices and most of them generate a sense that the utility gains are greater than the disutility created by the expenditure, the budget constraint still exists.</p>
<p>For example, imagine that you love beets and your marginal utility is more than the price of beets.  You would consider getting them, except that vanilla ice cream is selling for the same price as beets.  You can only afford one of them.  You love vanilla ice cream even more than you love beets.  So even though it would be rational to buy beets when vanilla ice cream is not a choice, it would not be rational to buy beets when vanilla ice cream is a choice.  We are also assuming there are no other utility considerations such as health, texture and so on.</p>

CC BY-SA 4.0
2022-06-22T03:31:08.260Z
2022-06-22T03:31:08.260Z
Dave Harris
<p>Does marginal utility consider human irrationality? For example, if the marginal utility of product x &gt; price(x), is the human certainly going to purchase product x is he/she is aware of it?</p>

CC BY-SA 4.0
2022-06-22T00:57:37.207Z
"*is the human certainly going to purchase product x*" --- **Probably not**. "*is he/she is aware of it?* --- **Probably not**. Are these the answers you're looking for?
Herr K.
<macroeconomics><financial-economics>
Human Rationality and Marginal Utility
Eduardo Culloch
# Human Rationality and Marginal Utility

(Asked by: username_0 on 2022-06-22)

Does marginal utility consider human irrationality? For example, if the marginal utility of product x > price(x), is the human certainly going to purchase product x is he/she is aware of it?

**Tags:** macroeconomics, financial-economics

> **Comments:**
> **username_1**: "*is the human certainly going to purchase product x*" --- **Probably not**. "*is he/she is aware of it?* --- **Probably not**. Are these the answers you're looking for?  

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## 1 answers

### Answer by username_2 on 2022-06-22. Score: 0 | Accepted answer

Psychological irrationality and economic irrationality are different. In economic rationality, you have well-defined preferences, you know your budget constraints and if you can move to a higher utility then you can make a plan to do so. So cutting yourself, if it makes you feel better as you are doing it, is rational.

Just a note, there are actual mathematical formulations for rationality under different conceptual structures but we are ignoring that here for a broad general discussion because there is something interesting to highlight in your question.

Let us define irrational as the logical negation of rational.

Let us negate the existence of well-defined preferences. There are two ways to arrive at that point. The first is to be a virgin. Preferences cannot be defined without experiencing the alternatives. The second is that there can be ill-defined preference structures such as rock-paper-scissors.

Now, if we negate not knowing our budget or other limitations, that implies a form of blindness or a loss of some form of perception as to reality. It can be from losing track of information in a complex environment but in a simple environment, it would be much like dementia. You could be 90 years old believing you are 20 years old and base your decisions on the realities of life when you were 20, even though that is now counterfactual.

Finally, you cannot work out what actions would take you to a higher utility. That would imply some form of impaired cognitive ability or psychosis. Even babies cry to get mom to come to feed them. It would be the same as a baby that couldn't figure out how to get fed.

Now, as to your other question, would people with the experience of a positive welfare gain choose to take it?

It depends.

If there are many choices and most of them generate a sense that the utility gains are greater than the disutility created by the expenditure, the budget constraint still exists.

For example, imagine that you love beets and your marginal utility is more than the price of beets. You would consider getting them, except that vanilla ice cream is selling for the same price as beets. You can only afford one of them. You love vanilla ice cream even more than you love beets. So even though it would be rational to buy beets when vanilla ice cream is not a choice, it would not be rational to buy beets when vanilla ice cream is a choice. We are also assuming there are no other utility considerations such as health, texture and so on.


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