Today's lecture was on Rationality, Utility, Value and Decision-making. The lecture consisted of six sections (Fig. 1): (i) concepts of rationality; (ii) rational choice in conditions of certainty; (iii) rational choice in conditions in conditions of uncertainty; (iv) challenges to rational choice (v) loss aversion and the endowment effect; and (vi) implications of rationality assumptions and threats to their validity for policy.
(i) Concepts of rationalityThe main point of this lecture is to give a working definition of what we mean by rationality in Economics. This is a complex construct with many potential meanings across a wide range of literatures. In Economics we generally tend to mean that decision makers are consistent in their behaviour rather than to question their motivations. The basic microeconomic models of the consumer generally assume rational utility maximising behaviour.