HUMAN DECISIONS AND RATIONALITY

We all are aware that rationality plays a huge role in governing the decisions we make. But like all human competences and qualities, rationality too has its precincts and shortcomings. Not all our

decisions can be backed with complete rationality but its existence cannot be ruled out either. So the question arises, how rational are we?

ARE WE UN-RATIONAL?

Economics is a study that deals with human beings and how they try to utilise the scarce resources available to them in order to satiate their needs. Now human beings are complex creatures and usually differ from one another. For example, I might like vanilla ice cream more than strawberry. You might be of a different opinion. Somebody else, might like chocolate ice cream more than any. This disparity makes it difficult to confine human beings into standard theories of universal rational behaviour. 

Ideally, all humans wish to hold all the information before taking any decision. They also yearn to possess the necessary cognitive abilities in order to process the data to the maximum limits in order to make an informed and unbiased decision. But is this the case in reality? The answer is simply no. It is impossible to have complete information and the cerebral abilities to always make a 100% rational decision. This in turn, restricts our coherent desire to be rational leading us to believe in a concept called Bounded Rationality.

Bounded rationality does not necessarily mean that humans are not rational. It simply states that human beings are rational to the extent that they can be with the limited amount of resources that they have in terms of the finite amount of knowledge, cognitive abilities, and time.

TOO MUCH INFORMATION (TMI):

The human brain is a very interesting organ. It’s functioning still remains a mystery to us. Up until now, I told you why our rationality is limited by the lack of complete information that might be material to our decision-making. But what if I tell you that too much information can also be a speed-breaker for our rationality? This can be elucidated using a concept called Choice Overload. 

Choice Overload can be associated closely with ‘overchoice’ in the sense that it may lead to unhappiness, decision fatigue, and the abandonment of decision making altogether. This may also lead an individual in going with the default options available. For an example, you have been wishing to buy a custom bag for the longest time, so in order to do so, you go to an online site and begin choosing amongst various alternatives from the base level. Midway, you realise that choosing each and every attribute of the bag is too tiring and time consuming; there are too many choices to make and very little amount of time to make them. So instead of customising your bag, you end up choosing the default option available on the site.

Apart from choice overload, human also indulge in avoiding freely available information. Over the course of time, many theories have emerged to explain this phenomenon of Information Avoidance. It may be in order to reduce anxiety that is caused by brand new information. It can also be done in order to avoid information that might contradict current judgements and opinions. Additionally, it might be done due to the inherent nature of humans to avoid all sorts of uncertainties that the new information might bring with it.

But the question still prevails, how much information is too much information?

CONCLUSION:

In order to create theories that are closer to reality, it is essential to consider the psychology of the human mind and what all factors contribute to the decisions that we take. Each human being is different from the other, and has a distinctive set of morals and values that govern their rationality. What is rational to me might seem absurd to you and vice versa. Behavioural Economics, thus, argues that a number of social and psychological forces play a significant role in shaping all decisions made by any human.