>A lack of information hardly indicates a lack of goal-pursuit (rationality) >nor, I suspect, would many "mainstream economists" be surprised to find that >young people on average have a level of rational ignorance than adults.
This is the problem. There is an assumption that "goal-pursuit" is all there is to rationality. If that were the case then there wouldn't be a problem, but the "rationality" assumptions built into to any inter-temporal optimizing model are so demanding that "sort of trying to get it right" will get you no where near the predictions of the of the full-rationality-perfect-information model. The deviations are significant both for the individual and for the policy implications. Take saving for retirement. A little irrationality and mandatary saving can cause big increases in welfare. Take college choice. There is no way that ignorance of returns could every be rational here given what's at stake. We're talking large effects on lifetime utility - - probably more than any other decision one makes. If it isn't rational to be completely informed on this topic it isn't rational to be informed on anything. Yet people seem to be amazingly uninformed. Anybody who says "oh well, there pr! obably getting it approximately right," is kidding him/herself. I stand by my assertion. Decision to continue schooling largely under weights the future benefits. Nearly everyone should get more schooling than they do. This is only one of many intertemporal decisions that people badly screw up because they aren't good at thinking about the future vs. the present. - - Bill
