by Mario Rizzo
Behavioral economists who like to indulge in normative pronouncements have decided that quasi-hyperbolic discounting violates rationality. In other words, suppose a person decides today that he will give up the hamburgers he loves beginning in 2010 (because of the high fat content). But then when 2010 arrives he reverses his decision and continues to eat them. To stress the point, let’s suppose that he repeats this preference-reversal one or two more times during 2010.
The poor fellow is, in addition to all his other troubles, violating standard economic rationality. Continue reading