Rationality

Do you make decisions in a ‘completely rational’ manner?

When you consider all the external influences such as bad moods, good moods, rainy days, insomnia, traffic delays, and other sorts of malaise and discomfort, is it really possible to be completely rational?

Economists have a term for the perfectly rational person: homo oeconomicus. This perfectly rational being makes absolutely rational decision in his actions and in his thinking. How does that happen?

One interpretation is the application of the principle of ‘maximization of expected utility. ‘ He tries to get the most from the future out of the decisions made today. This simple statement sounds straightforward until you realize that homo oeconomicus can’t predict the future. By the way, you can’t either. So, you really have no idea how your decision today will affect the future.

To compensate for this evolutionary hiccup in human capabilities, there is a process to determine the best outcome for your decision today. You take into account multiple possibilities for the future and assign a probability to each event based on it’s likelihood of occurring. Then you evaluate each of the probabilities. Once you’ve performed the math, you choose the decision that brings you the most value.

Sounds reasonable, right?

Except that’s not how people make decisions. Most people make a decision because they are stressed by their spouse or their mortgage payment is overdue.

There is a place for rational decision making, but it does not exist in a pure form in the human brain.