>Thus the question remains: What kind of policy one exactly wants to base on 'human's irrationality'. And whether it is good to base policy on irrational behavior.
That isn't what people are saying. What people are saying is that Capitalism is predicated upon the notion that people are at least mostly rational actors who act in self-interest, and so a free market will give people what they want. The criticism of Capitalism is that humans are not mostly rational, and regularly don't act in self-interest, and this leads to large amounts of human suffering.
People like Piketty aren't looking to eliminate the disparity between "irrational actors" and "rational actors"^, or to increase the amount of "rational" behaviour, but to eliminate the human suffering that Capitalism is supposed to eliminate if it worked as claimed.
^ Which is not a synonym for "wealthy". What Piketty is talking about is wealth accumulating to the point where the skilled and hard working don't have upward mobility. The hereditarily wealthy don't need to be particularly "rational actors", they just need to not spend their wealth faster than it accumulates.
P.S. Even "rational actors" suffer losses caused by the irrationality of the market.
But is the wealth they inherited the problem - or rather the abuse of power that comes with it?
If you agree that it is the abuse of power: Does this need additional complexity to address - or is it simply something to be addressed with (tax) laws?
Also, I think that the idea of 'eliminating human suffering' is a sure sign of an ideology. Human suffering can be reduced, certainly, but 'elimination' is utopian, an unreachable extreme.
For example, I would argue that a large property and luxury tax could alleviate most the problems that unwise wealth causes.
Further down in this thread, the user 'StandardFuture' more eloquently says what I think am trying to say - people are people and they just game whatever system is in place.
I think that in some sense, the idea of 'fixing the damn system' can actually be a trap. It may make one busy trying to think outside the box, to be busy inventing very advanced ideas for solving a problem that in the end boils down to 'people are people'.
That isn't what people are saying. What people are saying is that Capitalism is predicated upon the notion that people are at least mostly rational actors who act in self-interest, and so a free market will give people what they want. The criticism of Capitalism is that humans are not mostly rational, and regularly don't act in self-interest, and this leads to large amounts of human suffering.
People like Piketty aren't looking to eliminate the disparity between "irrational actors" and "rational actors"^, or to increase the amount of "rational" behaviour, but to eliminate the human suffering that Capitalism is supposed to eliminate if it worked as claimed.
^ Which is not a synonym for "wealthy". What Piketty is talking about is wealth accumulating to the point where the skilled and hard working don't have upward mobility. The hereditarily wealthy don't need to be particularly "rational actors", they just need to not spend their wealth faster than it accumulates.
P.S. Even "rational actors" suffer losses caused by the irrationality of the market.