Rationality...

Jerusalem, 2:30 am. Can't fall asleep.

I can't think of anything interesting to write either. Maybe a short intro will do.

Can an economist think of any rational explanation to insomnia? Is there any incentive to stay up late and write blogs? It is hard to think of any.

The most interesting part of being an economics graduate student (at least for the really geeks, such as myself) is that you try to link every interesting thing you see to economics. Such as: what are the incentives behind the actions other people do, or what is the strategy I should "play" in order to reach my goal in this situation, or what composes the utility function of that other guy!? I must admit, it sounds like it is very boring, but it is actually funny... and it really helps you to understand other people. I think all who read Freakonomics agrees with me...

I heard Prof. Robert Aumann (Nobel Prize in Economics Lauréate 2005) about a week ago at the 19th Summer School of the Institute of Advance Studies of the Hebrew U. He talked about one of Arrow's economic model which gives an explanation to discrimination due to skin color or other observable characteristics. I know, it sounds awful. But his point was very right. Discrimination is rational. It does not mean that it is something good. But it can be explained as a rational behavior. The same with wars. Wars, even though most of the time we think otherwise, are rational. Ahmadenijad is rational. Before you stop reading and say "this guy is crazy, let's get out of his blog", wait a second, trust me, you may agree with me if you reach the end of this parragraph. In any case, most of the decisions of human beings are guided by rational behaviors. And the only way of avoiding several outcomes, such as discrimination, war or an Iranian president who wants to blow out Israel, is trying to understand the rationality behind them, and only then act to generate the proper incentives that will offset the undesired outcome.

Yes, I know what you are thinking. This guy thinks that because he is an economist he can solve all the world's problems with a mathematical model. Well, I don't. First of all because I don't consider myself to be good with those kind of models. But even if I did, I am not thinking that those are the solution to all of our problems, but for sure they can help us to understand reality, or at least, make life more interesting.

I guess you will see lots of things of this kind in this blog. You are all welcome to comment and give some ideas about interesting topics.

It is 3:01am. My laptop automatically adjusted the screen's brightness level to the lowest one, hinting that the battery is low enough. I think it is time to sleep.

The Homo Economicus