| Abstract | This paper models and analyses the relationship between a decision maker’s degree of rationality and his wealth level. By introducing some behavioral economic concepts, such as limited self-control and ostrich effect, and describing formally the interaction among neuro-systems, this paper developed a model, predicting to empirical facts: First, the degree of rationality varies with wealth level. Second, how the degree of rationality changes with wealth varies in commodity market and financial market; that is, the poor are more rational in budgeting, while the rich are more rational in investing. Based on these predictions, this paper argues that there seems to be a more complicated relationship between efficiency and equity. A more unprejudiced economy makes is, in some sense, more efficient, when irrationality is present. |