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Rationality in Decision-Making Essay

Experts in behavioral, as well as market finance cite rationality as a significant psychological variable that dictates investor performance. Rationality is an aspect that has long been considered in understanding human behavior, and especially more within economic paradigm (Elster 13, Kekes 115). While rationality, as well as rules of fairness, goes beyond conventional economic principles (Smith 166), experts agree that it is a crucial component to the same. From an illustrative perspective, rationality is projected at the start (Pierce 6) when Kate states that, “Broadly speaking, the aims are to make better materials than we manufacture now but to make them at life-friendly temperatures and without toxic ingredients, like the filaments spiders make or the shell material” (Pierce 6). The statement basically highlights the importance of rational decisions, rather than decisions merely based on perceived gains. It highlights the importance of looking at negative aspects of decisions made, alongside the positive aspects.

The position emerging from the aforementioned statement is further reinforced in Pierce where he states that the decision by the young lawyer to let emotions prevail over rationality, amounts to the lawyer acting as a conman rather than am ethically responsible lawyer. Deeper within Pierce (9), Hiram further states that people currently acknowledge that success is dependent on functional knowledge, together with the natural processes and principles and stress, there is a need to respect the processes and principles (Pierce 13). Further, it’s out-rightly affirmed that success is not a product of supernatural forces or trial and error approaches. This affirms the importance of putting together all the prevailing circumstances in order to come up with rational conclusions.

Kramer et al. (174) go further to highlight the importance of trust as a means of social and individual identification. They cite the fact that various researches acknowledge that trust is the basis for all forms of cooperation and that the trust stems from rational decision making (Akerlof and Kranton 718; Arrow 8; Becker 9). Handel, further reinforces this assertion affirming that rational systems generally focus on instituting within consideration, choice behaviors and hence organizational decision making, which is the basis for economic linked to firms (Handel 434). According to Handel (435), rational choice theorists often work on the presumption that personal decision-making element in question is “typical” or “representative” of other bigger group, which constitutes the firm. He, therefore, affirms that individual behaviors transform into much larger choices which interact with organizational factors to yield outcomes.

The emerging scenario from Pierce (8) reinforces the fact that position the most rational approach defenders, is actually sincere. They affirm that the approach is much useful given that it often produces non-tautological predictions. This can be explained by a scenario whereby a scholar wishing to account for a given experiential phenomenon X, for instance, X may be the due to the fact that wage rates offered to staff (following inflation adjustment) often tend to increase during fortunate economic periods and drop during poor economic periods. A scholar can develop a theory Y which predicts X, more especially for a person who has extensively knowledge of X. According to arguments derived from Pierce, such a theory needs to be premised on factual decisions, rather than mere assumptions and suppositions. Bothe Handel (434) and Pierce (13) highlight the importance of making tradeoffs between ideas in order to come with rationally founded conclusions with regard to economic aspects. All aspects generally pointed back to an individual acting rationally in order to ultimately come up with factual positions on various aspects.

Works Cited

Akerlof, George A., and Rachel Kranton, “Economics and Identity.” Quarterly Journal of Economics 115.3, 2000: 715-53.

Arrow, Kenneth J. “Methodological Individualism and Social Knowledge.” American Economic Review Papers and Proceedings 84.2, 1994: 1-9.

Becker, Gary. “The Economic Approach to Human Behavior,” in the Economic Approach to Human Behavior. Chicago and London: The University of Chicago Press, 1976, pp. 3-14.

Elster, Jon. Ulysses and the Sirens: Studies in Rationality and Irrationality. New York: Cambridge University Press, 1986.

Handel, Meagan. “Organizational Deviance” in The Sociology of Organizations. Classic, Contemporary and Critical Readings, New York: Sage Publications, 2003, pp. 433-436.

Kramer, Roderick, Hanna Benjamin., Steven Su, and Jane Wei. Collective identity, collective trust and social capital: Linking group identification and group cooperation. In M. Turner (Ed) Groups at Work. London: Erlbaum, 2001.

Kekes, John. A Justification of Rationality. New York: SUNY Press, 1976.

Pierce, Jane. The Nature of Economies, New York: The Modern Library (Random House), 2000.

Pierce, Jennifer. “Rambo Litigators: Emotional Labor in a Male-Dominated Occupation.” Masculinities in Organizations. Ed. Cliff Cheng. New York: Sage Publications, 1996.

Smith, Vernon L. Rationality in Economics: Constructivist and Ecological Forms. Cambridge: Cambridge University Press, 2008.

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IvyPanda. (2020) 'Rationality in Decision-Making'. 13 September.

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