2015/07/14 by Wolfgang Kuhle, Kuhle, Wolfgang
Economics, Econometrics and Finance · Physics and Astronomy · #Complex Systems and Time Series Analysis #Economic theories and models #FOS: Economics and business #FOS: Physical sciences #General Finance (q-fin.GN) #Physics and Society (physics.soc-ph) #physics.soc-ph #q-fin.GN
paper · pdf · doi:10.48550/arxiv.1507.04934
Maximization, Rationality, Economics, Biology, Group Selection
arxiv created 2015/07/14 · openalex publication_date 2015/07/14 · arxiv updated 2015/07/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
We develop a model to study the role of rationality in economics and biology. The model's agents differ continuously in their ability to make rational choices. The agents' objective is to ensure their individual survival over time or, equivalently, to maximize profits. In equilibrium, however, rational agents who maximize their objective survival probability are, individually and collectively, eliminated by the forces of competition. Instead of rationality, there emerges a unique distribution of irrational players who are individually not fit for the struggle of survival. The selection of irrational players over rational ones relies on the fact that all rational players coordinate on the same optimal action, which leaves them collectively undiversified and thus vulnerable to aggregate risks.