Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way?

The economic model of decision making assumes that individuals are rational and always make choices that maximize their utilities (satisfaction or happiness) while minimizing their costs. This is often referred to as the principle of rational choice, and it involves individuals weighing the additional benefits (marginal utilities) and additional costs (marginal costs) of each option they consider.

In real-life situations, it can be challenging for individuals to act precisely as the rational economic model assumes. There might be limited information or time constraints that prevent people from gathering all the necessary data and performing detailed calculations to determine the exact marginal utilities and costs of each choice. Furthermore, individuals often rely on emotions, cognitive biases, and heuristics (mental shortcuts) to make decisions, which can deviate from the ideal rational behavior.

Despite these deviations from the economic model of decision making, it can still be argued that individuals behave approximately in a rational way. This is because, in practice, people often strive to make choices that generally improve their well-being and avoid those that would harm them. Even though their decisions might not always be based on precise calculations of marginal utilities and costs, individuals still use information available to them to make decisions they believe will benefit them in the long run.

As an example, consider a student deciding whether to attend an expensive, prestigious university or a more affordable, but less reputed college. The student may not calculate the exact marginal costs and benefits of each option, but they will still consider factors such as future job prospects, potential income, and personal preferences. They will make a decision based on these factors that they believe will maximize their utility, even if it may not be the exact decision a purely rational economic model would predict. Another example could be a person choosing between buying a more expensive fuel-efficient car or a cheaper, less fuel-efficient one. The individual may not calculate the exact marginal cost of fuel savings over time, but they will still weigh the advantages and disadvantages of each car, such as the initial price, fuel efficiency, and overall quality, to make a decision that they believe will be best for them.

In conclusion, while individuals may not always act precisely as described by the economic model of decision making, it can be argued that they behave approximately in a rational, calculating way. People generally use the available information – even if not complete or exact – to make decisions that aim to maximize their well-being and minimize their costs. This approximate rational behavior ultimately helps individuals navigate through their choices and make decisions that best suit their situations and preferences.