Economics And Psychology Perception Of Rationality Essay

1747 Words Dec 6th, 2016 7 Pages
When comparing both economics and psychology, it is true that both of the social sciences look at the behaviour of individuals and how they react to situations where they are faced to make a decision. However the way both of the two go about it is very different to a small extent. Economics defines rationality as consistent choices made by people to maximise their self interest and utility. It also assumes that people are able to make choices whilst processing all the information without hindering other operations that our brain does. Whereas psychology focuses on “learnt behaviours” that are unique to the individual when trying to be rational by making so called rational choices. The psychology perception of rationality (or the lack of it) makes for a more convincing argument as the economic argument which is very robust and seems outdated.

When looking at the economic perception on rationality, it first states that individuals will use the utility function (ranks alternatives for the utility given to the person) in order to choose the alternative that will maximise their utility and their self interest. This is highlighted by a quote by Edgeworth (1881 p.16), “the first principle of Economics is that every agent is actuated only by self-interest”. This shows that the theory of self interest and utility maximisation is central to being rational to economists.. However we have to question this notion of individuals always depending on the utility function, if we were to…

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