Posts

Showing posts with the label safety

Decision Making as Output and Bounded Rationality

  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

Economics of Compulsory Safety Enforcement

Certain things when made obligatory invite a recoil. An instance which is observed quite often when helmets are made compulsory for two wheeler riders. The rule is often in the rule book yet the enforcement keeps waxing and waning. Once in a while, the government issues a strict notice of wearing helmets, usually counter-reactions verbally hostile follow and after a cooling off period, the enforcement turns lax. Yet it is interesting to decode why the rule is essential. It is obvious wearing helmet improves personal safety and thus it should be in one’s own self-interest to wear a helmet voluntarily without a need for a rule. At least rationality in economics would assume so. However, life is not shades of white and black but shades of grey. To each individual it is the personal cost-benefit decision that matters. There is obvious discomfort in wearing a helmet. It might be so that it acts as a barrier to side view and to hearing. The benefits is obviously increased safety in case