Chapter 5
Behavioral Economics and Cryptoeconomics
5.1 Behavioral Economics vs. Traditional Economics: Irrational vs. Rational
Traditional economics assumes that people are rational – the implication of this assumption is that we can calculate and scale the value of all the choices we face in our daily lives and choose the one that is most beneficial to us. And once we make mistakes and do irrational things, through the “power of the market” will quickly pull us back to the path of correct rationality. Based on these assumptions, from Adam Smith, generations of economists have derived far-reaching and all-encompassing conclusions: from taxation to health policy to the pricing of goods and services.
However, we are far less rational than ...
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