Are People Rational (in the Economist’s Sense) and Reasonable (in the Lawyer’s Sense)? Whatever Your Answer to That Question, Does It Matter?

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“It has been said something as small as the flutter of a butterfly’s wing can ultimately cause a typhoon halfway around the world.” ~ Chaos Theory

Everyday, you make decisions that affect the path that you have taken, to different degrees, resulting in the current situation you now find yourself in. Chaos Theory reflects the fact that however small the decision may be, the consequences have the potential to be substantial. These day-to-day decisions, may have huge implications on tomorrow’s, thus one would believe/hope that they are made rationally and reasonably. This essay aims to discuss whether these decisions we make are rational in the economic sense and reasonable in the lawyer’s sense and whether it ultimately matters?

Rationality and reasonability are inseparable from decisions (Sibley; 1953). Every decision an individual makes is made, perhaps unconsciously, in the belief that it is rational and reasonable in their current environment as we would not make them otherwise. Their rationality and reasonability comes under scrutiny from third parties, after the decision has been made with the benefit of hindsight (Sibley; 1953). The opinions I express on every case study that follows is of course one with hindsight, it is impossible for me to put myself in exactly the same situation as the individual who made the decision due to different life experiences in the short (on the day) and long (that month or the rest of his/her life) term. We believe there is a rational explanation for any decision’s success of or failure (Mankiw & Taylor; 2006). As we analyse the outcome of a decision, we are uncomfortable unless we can find solid evidence to explain what happened. We have difficulty in accepting the chaos of life as an answer (Hoffer; 1985).

The Oxford English Dictionary defines the colloquial meaning of the word rational (of a person) as being “able to think clearly, sensibly and logically” (OED; 2004). The economist believes that rational people systematically and purposely do the best they can to achieve their objective, given the available opportunities (Sugden; 1991). Economists assume that people are highly rational and self-interested allowing theories to be modeled around the forecasted actions of such an individual (Mankiw & Taylor; 2006).

Reasonability in the eye of the law is defined as “showing sound judgement, making sensible choices or being a sensible person” (Allen; 2005). Lucia Zedner adds to this by making this reasonable individual fair, just and free from favouritism, self-interest, bias, deception and conforming with established standards or rules.1 Similarly as to is economics with rational, law and reasonable are intertwined, the term is used through tort and criminal law to symbolise a hypothetical individual who acts with average care, skill and judgement and “serves with comparative standard for determining liability” (Zedner; 2004); resulting in the omnipotent question over ones actions: “How would a reasonable person act under the circumstances” (Cooter, R. & Ulen T.2007).

The core economic theory is: supply and demand, built upon the existence of excess demand and limited supply that allocates resources to achieve maximum efficiency, utility and satisfaction in the free market (Mankiw & Taylor; 2006). Quantity and price are the variables that are used to allocate resources and rational behaviour is assumed in this theory, as represented by the achievement of market equilibrium (Mankiw & Taylor; 2006). The point where demand has been satisfied under the constraint of limited supply, is accepting that people have acted rationally and reasonably in systematically and purposely doing their best to achieve the objective of efficient utilisation of resources to achieve market agreement (Scott; 2000).

Theoretically, the existence of an economically rational and legally reasonable individual is acceptable however once the supply and demand theory is incorporated into a...
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