behavioural economics

June 2026

behavioural economics suggests that humans are irrational because we don't always act in a way which maximises their utility for two main reasons:

1) we don't have the capacity to make a judgement call - too young / cognitively restrained / under the influence / under time pressure (thinking, fast and slow)

2) we default towards immediate gratification, habits, loyalties, and we have our own perceptions of risk.

for the second point, we often point to irrationality as not maximising financial income, which is used as a proxy for utility, which i think might be a cause of said irrationality.

just because we can quantify financial income, but we can't quantify other things that would impact our utility - altruism, embarassment, our risk palette, doesn't mean that we are being irrational - if i spend £5 for a bottle of water at a funfair or the airport, that could be because i am prioritising other parameters for utility, rather than being irrational - am i exchanging x units of time/embarassment for y units of money.