In terms of epistemic and instrumental rationality
According to the theory of rational irrationality, there are two distinct forms of rationality:
- Epistemic rationality, which roughly involves consists forming beliefs in truth-conducive ways, making reasonable efforts to avoid fallacious reasoning and keeping an open mind for new evidence.
- Instrumental rationality, which involves choosing the correct means to attain one’s actual goals, given one’s actual beliefs. This is the type of rationality that rational choice theory (and hence much of microeconomics) implicitly alludes to.
Rational irrationality describes a situation where it is instrumentally rational to be epistemically irrational.
Conditions for rational irrationality
Rational irrationality is more likely in situations where:
- people have preferences over beliefs, i.e., some kinds of beliefs are more appealing than others, with this appeal being unrelated to the truth or lack thereof of the belifes, and
- the marginal cost to an individual of holding an erroneous (or irrational) belief is low.
In terms of a demand for irrationality
In the framework of neoclassical economics, there is a demand for irrationality. A person's demand curve describes the amount of irrationality that the person is willing to tolerate at any given cost of irrationality. By the law of demand, the lower the cost of irrationality, the higher the demand for it. When the cost of error is zero, a person's demand for irrationality is high, reflecting the usual operation of the demand curve, possibly exemplified by a zero price effect.