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    Economic Policies

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    Many human behaviors do not appear to be rational, but economists assume most human behavior is. Economist Herbert Simon developed the concept of "bounded rationality," which means that people are as rational as possible (seek to act in their own best interests) given their limitations. With this in mind, pick a behavior that appears irrational to other people but has rational components for the person doing it.

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    One activity that appears irrational to other people is an individual chopping down a tree on the street in front of his house. Other people find it irrational because the tree improves the appearance of the person's house and provides valuable shade when the strong ...

    Solution Summary

    This solution gives you a detailed discussion on bounded rationality.