This is going to sound kind of weird. A "perfectly rational" economic actor would make decisions about miles vs. cash back based on their economic needs and what value the miles are. Of course, there's no easy way to assign value to miles (this has been debated ad nauseum).

What I will say, is that for me accruing miles has a lot of value because I ONLY redeem them for travel. In a way it forces me to get out and see the world. It's so easy to just take that cash back, sock it away in a retirement account or buy the latest tech fad (iPad 2). But having miles makes me travel, and for that alone I love them. In the end that is much more valuable than the cash.

I have about 400,000 miles now, and I'm in my late twenties. I dream about the vacations I will take and where I want to go. Sure that could be $4,000 or so in cash, but I know that I would spend that money on car payments, or gadgets, or other stupid things. Miles are an investment in life experiences, and they give very good return on investment.

And even from an economic perspective, many here redeem miles at LEAST at 2cpm, often as high as 8-9cpm. Effectively that is as good as a very good cashback card, plus huge signup bonuses are common.