My, what a discussion we have generated.
On rationality, I am always surprised that economists think there is
any thought process associated with rationality. At best it is a
Hobbesian pain/pleasure principle. In practice, whatever people do
is defined as rational (we don't ask why they do it as psychologists
would); the question is to explain why anyone similarly situated
would behave in the same way.
Perhaps we ought to ban "rationality" from the vocabulary of
economics; it misleads because it implies something that it does not.
Fred Carstensen