If one truly loves a discipline, as I do economics, one must be
prepared to celebrate, and not to decry, challenges to its bedrock
dogma.  Under
attack of late has been the postulate of the purely rational utility-maximizing Homo
Economicus. 

As a Princeton alum, I’m pleased to report that some of the ground-breaking—and
Nobel Prize-winning—work in this area has been done by Princeton’s
own Professor Daniel Kahneman.  It turns out that none of us,
up to and including JD/MBA’s, can escape built-in
human cognitive biasses including:

• "anchoring," or giving irrational weight to a negotiation’s starting
  point (think "Manufacturer’s suggested retail price" on the car-lot);
• "framing," or essentially starting with the wrong analytic toolset;
• optimism (self-explanatory, and God bless it);
• overconfidence (self-explanatory, and often a curse),
  and;
• self-serving bias.

The last deserves special mention:  A study presented a cross-section
of auditors at a Big Four firm with five ambiguous auditing vignettes
and asked if they deemed them GAAP-compliant.  Half the auditors
were told to imagine they worked for the firm in question and half
that they worked for a firm thinking of doing business with the other
firm.  The first group was 30% more likely to bless the financials
than the second.