Of Diet Cokes and Brain-Focused Economics
By David Henderson
Mullainathan believes he has found a choice bias that undercuts the standard economist’s claim that people are rational. But has he? At first glance, his choice not to experiment doesn’t make sense. But I think Mullainathan is more rational than he thinks he is. Why? Because the critically scarce resource, which he doesn’t mention, is his brain. Our brains seek to optimize the allocation of their own internal resources, which are mainly neurons and energy. A full understanding of rationality should include economizing on using one’s brain.
This is from Richard B. McKenzie “Of Diet Cokes and Brain-Focused Economics,” the Econlib Feature Article for March.
I highly recommend it.
By the way, Sendhil Mullinaithan co-authored with Richard H. Thaler, winner of the most-recent Nobel Prize in economics, the article “Behavioral Economics” in The Concise Encyclopedia of Economics.