This article examines some of the reasons why banks and insurance companies have been accused of discrimination, and shows that this is by and large a false accusation. Economic analysis demonstrates that racial discrimination is not a profit maximizing strategy. Actually, unwise public policies are actually precluding many consumers from the market.JEL Classification: J15

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In spite of the incredible reputation of the General Theory, I could not find in it a single important doctrine that was both true and original. What is original in the book is not true, and what is true is not original. In fact, even most of the major errors in the book are not original, but can be found in a score of previous writers."-Henry Hazlitt (1995 [1960], 3) "We have been going back and forth for a century. I want to steer markets (Keynes). I want them set free (Hayek)."-John Papola & Russell Roberts (2010)

Summary The theory of rational irrationality suggests that voters are biased and do not face sufficient incentives to choose rationally; instead they vote for various private reasons. As a result, socially and economically destructive policies can receive widespread public support. Furthermore, because there is no private benefit of learning from experience, such policies can persist over time. We argue here that despite this otherwise dismal outlook on public policy, the theory of rational irrationality leaves two avenues for economically sensible reform: First, when the ex post costs of irrationality are higher than expected, rationally irrational voters will reduce their consumption of irrationality and demand more rational policies. Second, rationally irrational voters can be convinced to rationally update their policy preferences through the use of appealing rhetoric and persuasion by experts. We discuss these two avenues for reform using the example of the repeal of the 18th amendment, which, as we will show, relied on both updating as well as persuasive campaigning.

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