Dat inequality

[CoccoBill]

I should add that "rational behavior" is about consequences. You get to choose what kind of bike you want to ride because you are you and nobody encompasses your preferences as well as you do. This is true whether or not you make a really "stupid" choice. The only other option is intervention from people not you. It's for me and everybody else to have some say in what you do with yourself. No matter how flawed markets are (because they attempt to organize the fundamentally flawed humankind), they're still better when used to decide personal issues than government

Markets are not Utopia because humans and the world are all sorts of messed up. "Optimal" human interaction creates all sorts of "less-than-optimal" results, some are downright terrible. In no way do markets act flawlessly. That would require humans being without flaw. You could point out a million problems with markets and it isn't an argument against markets, because we're dealing with fundamentally flawed topics like how humans interact.

When economists use terms like "rational behavior", it has nothing to do with flawlessness. It has to do with accountability. When the state intervenes in your choices, it is not acting as rationally as you are, even if your choices are self-destructive and the state's ones would have likely helped you

I, along with investopedia disagree:

"Definition of 'Rational Behavior'

A decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption that all individuals taking part in an action/activity are behaving rationally."

As you readily admitted, individuals and therefore markets often do not make the optimal choices. The whole basis for free markets is that statistically the markets do behave rationally, which may be the case in many situations, as S. Dubner and S. Levitt try to demonstrate. More on the subject here:

http://economicstudents.com/2013/05/...ty-assumption/

What you're saying is that the price is always right, aka Pareto optimal. If the market behaves irrationally this is not the case and it will lead to inefficiency. It has been proven that free markets under some circumstances can lead to Pareto optimal results, but only under very specific conditions (markets exist for all possible goods so there are no externalities, all markets are in full equilibrium, markets are perfectly competitive, transaction costs are negligible, and market participants have perfect information). Even then, Pareto efficiency is only about efficiency, not about desirable distribution of resources, as it makes no statement about equality or the overall well-being of a society.

At least in theory these and other issues (inequality, condensation of power, sustainability, market stability) with free markets could be tackled with policies to an extent.

[wufwugy]

I, along with investopedia disagree:

A decision-making process that is based on making choices that result in the most optimal level of benefit or utility for the individual. Most conventional economic theories are created and used under the assumption that all individuals taking part in an action/activity are behaving rationally."

This doesn't disagree with me. I'm trying to explain what that passage means. "Optimal" or "utility maximizing" are inherent facets of consequential choice. This is the basis behind what economists mean when they discuss "rational behavior". Take Becker's rational addiction for example. It isn't that drug addicts who choose addiction are doing what is optimal according to some objective moral standard (how could we even know that?), but that they're making the optimal decision according to their own inherent utility

The "optimal" of smoking another crack rock is different than how the word has been used ITT. I think this is important since understanding the difference between markets and regulation is in consequences. Regulation is an attempt of organizing the same exact stuff that markets do, except with less consequence. That alone is basically why markets work better. We see this in action in our own world all the time. Who's better at spending your money: you or your neighbor? The answer is you and it's exclusively because you bear a greater brunt of the ramifications of your spending choices. This effect doesn't necessarily exist when viewed individually, but it does exist in populations. Some individuals would benefit greatly by regulation, but entire societies (aggregation of individuals) benefit more by free markets. Even if "you" may be better at spending my money than "I" am, the "universal you" is not better at spending my money than the "universal I". What I'm trying to say is that some examples can be found of one person spending somebody else's money better, but the effect breaks down when it is expanded to everybody.