In this Barcelona GSE Research Spotlight Video, Professors Jose Apesteguia (ICREA-UPF and BSE) and Miguel A. Ballester (UAB and BSE) outline the challenges of analyzing individual decision-making and propose a new method for doing so that measures human inconsistency and welfare costs.

The method proposed by Apesteguia and Ballester is the first to incorporate both rationality and welfare when evaluating individual choice behavior, which could be helpful for public institutions when considering the implementation of a new policy.

This paper, “A Measure of Rationality and Welfare” (BSE Working Paper No. 573), is forthcoming in the Journal of Political Economy.