Humans are irrational beings. Choices differ from person to person, and even from lab experiments to the real world. So, with all that differentiation, how can economists expect to understand how market forces will impact the decisions that individuals make? It turns out that most individuals go about making decisions the same way, but the results of these decisions vary wildly.
Nobel laureate Gary Becker attempts to explain how that process works, “To me, maximizing utility simply means the following: that consumers can order all the opportunities they have available to them…possible choices. They can order them so they prefer some more than others, so they can rank them. And that they have limited resources. They have limited incomes of wealth, time, whatever it may be. And that they attempt to choose that possibility… that combination of goods and so on that is ranked the highest consistent with their limited resources. Now I think this is a testable theory.”
Understanding and predicting those priorities, though, is a different story. Find out why with Nobel economists Gary Becker and Ronal Coase in the latest episode of the Free To Choose Media Podcast, Consumer Behavior.