"O.K. -- but what if you had to chose between buying groceries today and getting a car that was an absolute requirement for a job, which would put food on the table every day thereafter? A rational decision would take the longer term into account as well as the immediate needs.
A lot of college students have to make a similar decision. They eat macaroni and cheese, take the bus, and live in a dorm for years -- so that they can eventually qualify for a better job. Is that more or less rational than dropping out early to take a job?"
True enough. Then we get into opportunity costs. I guess the example I was trying to put forward to kinda missed.
Let me try another: 'Giffen goods'. This is one of the few areas in which rational doesn't appear to apply. Case in point: The increased prices in tennis shoes, and folks still buying them despite the increased price, especially in demographics that would be better served by 3 square meals a day. There are some other areas I could think of examples for.
Typically, the rational person is assumed to have weighed opportunity costs, and forgone the non-utility of such an item in order to provide for their basic needs. I did notice in one of your other posts you touched on this indirectly ( pointing out that there is the generally sound assumption that there aren't too many irrational folks out there with respect to making choices).
Also, kudos for pointing out the difference between positive and normative economics in another post. It is the normative stuff where a lot of fuzziness ( and often mischief ) takes place.
This is one of those "one the other hand" moments.
You mentioned opportunity costs -- which have to be considered. Someone else said that the students were acting on faith. The students have to decide with imperfect information. They don't know what their current value is in the labour market (opportunity cost), nor what the future will bring -- thus the leap of faith. We know that imperfect information is one of the main causes of market failure. Instances of market failure are often a justification for government intervention. In the case of students -- governments subsidize tuitions, and provide loans, bursaries and scholarships. The government is operating with better information -- i.e. that, on average, the more education one has, the more they can earn. It can make a virtually risk-free investment in students, while individual students do face considerable risk of never recovering their full opportunity costs.
Good point about Giffen Goods. There is some debate whether or not they actually exist in the real world -- but I don't think that the real world should get in the way of a good theory. :-) One could argue that the satisfaction that a person derives from buying something at an inflated price is it's own reward, and that the purchase was actually rational. Wealthy people pay much more for luxury goods than they are worth from a strictly utilitarian viewpoint -- they get the reward of being recognized as a cut above the peasantry because of their expensive possessions.
I agree that normative economics is where the mischief lies. The normative aspects are needed -- but it isn't necessarily up to an economist to make those judgments.