Understanding Classical Rationality at a Basic Level I am a high school student in an intro Microeconomics class (note that we have not covered utility functions) and I'm utterly confused about the classical concept of rationality. I certainly understand that that conception does not accurately describe a good chunk of real-world behavior (hence behavioral economics). 

Nevertheless, my concern which I ask about here is more basic: Classical rationality as described in my textbook (Krugman/Wells' Economics) doesn't even seem coherent. It's essentially just defined as "people act to make themselves better off," but then the book (and online sources) go on to conclude that, under this definition, it is irrational to, say, honor sunk costs. 

But why need this be so? (again, I'm not even talking about behavioral economics, I'm just trying to understand the justification within the traditional paradigm) After all,suppose person A knows they will derive satisfaction from honoring sunk costs. Then doesn't honoring sunk costs make them better off (it fulfills their desire for happiness), and therefore becomes rational for person A? 

I feel like there may be some restrictions to the traditional definition of rationality that my book and teacher have glossed over. Because right now I am utterly at a loss for how my book can draw such specific conclusions about what is rational and irrational when the definition of rational behavior given seems malleable enough to make virtually any action rational for at least some people.
After all,suppose person A knows they will derive satisfaction from honoring sunk costs. Then doesn't honoring sunk costs make them better off (it fulfills their desire for happiness), and therefore becomes rational for person A?


Utility experienced from honouring sunk costs is treated separately from honouring sunk costs themselves. ( section 2 of http://www.princeton.edu/~tkelly/papers/Sunk%20Costs,%20Rationality,%20and%20Acting%20For%20the%20Sake%20of%20the%20Past.htm )

If I feel good for rescuing my phone from a toilet, or feel bad, that’s separate from the phone being in the toilet.