ABSTRACT
There is a famous cartoon of a soldier in a trench being shelled in the First World War who turns to his fellow soldier to say, ‘Well, if you knows of a better ‘ole, go to it’. 1 There is some element of this remark in how economists think about choices. In recent years economists have investigated economic behaviour in a much more detailed way than before and the basic model of an optimising rational consumer has been supplemented with insights from psychology – which suggest that social, cognitive and emotional factors may all play important roles. In this chapter we present a broad framework for choice which has at its core the notion that an individual faced with alternatives will choose the ‘best’ one. That might sound a rather mild assumption. However, it can be challenged if our definition of what is ‘best’ is defined too narrowly, or if our model demands too much of individuals’ abilities to weigh complicated options.
