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The Irrationality of Rationality July 19, 2016

Posted by OromianEconomist in Uncategorized.
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Odaa Oromoorational constrained choice


The confined view of rationality regarding humans has strong relevance while carrying out activities like trade and exchange. Although rationality must not be ignored, understanding other key drivers behind transactions could widen our approach to comprehending and applying economics.

For instance, why do some universities conduct exams without an invigilator? Or why do most people value products they use beyond their monetary value (such as a coffee mug or passes for a cricket match)? Or even with no waste bins, why do some roads stay significantly cleaner than the others?

To answer the above questions, one would have to move away from the usual notion of maximising self-interest. Much literature has come to light during last few decades by behavioural economists and psychologists such as D. Kahneman, A. Tversky and others, in the field of psychological sensitivity. They suggest that various characteristics determine the choices that one makes. Most importantly, they point out that these reasons are beyond the maximisation of self-interest of the individual. Some of these characteristics include attitudes of people, such as higher aversion to losses of wealth and possessions than to identical amounts of gains, or a bias towards an unlikely or a rare event, or any limitation of memory due to biological factors……. Read more at:-

http://theindianeconomist.com/the-idea-of-rationality-2/


 

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