Regarding the "financial harm" example: the only irrational thing Paulos did was keeping all his eggs in one basket, instead of diversifying his portfolio. As a rule almost without exception, unless you have insider information, it's never more rational to buy one single stock instead of another, regardless of which ones are soaring and which ones plunging at the moment. If you're not convinced, consider the following: at each point during Paulos's purchases of Worldcom stock, if it had been certain from public information, or even highly likely, that the stock would keep plunging, then shorting it would have been a killer investment -- to the point where it would be foolish for big investors to invest in anything else at the moment. But of course, that was not the case.

Maybe I'm reading too much into your example, but it seems like you believe that investing in Worldcom stock at that point was somehow especially irrational compared to other single-stock investments. Yet, any non-diversified investment in a single stock is pretty much an equivalent gamble, and Paulos was not more irrational than other people who get into that sort of gambling. (Except arguably for a tiny number of extremely sophisticated investors on Wall Street who have superior ways of making predictions from public information, but even the existence of such creatures -- as opposed to those favored by survivorship bias -- is uncertain.)

Edit: Come to think of it, some of the MWI proponents here should agree that by their criteria, there was nothing irrational about Paulos's investment at all.