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Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Output Saving and Digital Domain

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Both production and consumption no longer resemble what we have envisaged them over last 300 years or so. As we begin the third decade of the 21 st century, the economic universe is stark in it contrast to its look a mere 80 or so years ago. Simon Kuznets and team ‘invented’ the concept of GDP in 1937, yet eight decades down the line, the limitations of the same are getting becoming ever more visible. The answers lie in the emergence of what one terms the information revolution. Internet and subsequent rapid diffusion has touched upon daily lives in many ways. Manifest is the new theoretical discussion on the role of production and consumption in microeconomic literature.   Economics functions on the notion of scarcity. Implied is constant endeavor to produce goods using lesser and lesser resources. In production analysis, isoquants represent locus of all combinations of inputs producing same level of output. Derived from the same is the idea of least cost production. Factoring
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