Rationality in the terms of human behaviour can be seen as the act of doing something within reason set by social norms. Rationality can be seen as being logical especially when linked to human behaviour. To be rational in terms of human behaviour indicates the person is making certain decisions to reach the most optimal level of benefit/utility, whether that be to save the most money by getting off-peak trains or to work a part-time job to have more time for family. In this essay, I am going to explain how economics and psychology interpret rationality and conclude with which one out of the two I prefer.
Rationality in economics is described in the first principle which is that every agent is actuated only by self-interest (egoistic behaviour). …show more content…
As we know in economics preferences are split into three laws (complete, transitive and reflexive) whereas in psychology the preferences are altered by how the information is presented known as framing which can then be split into three parts, loss framing, gain framing and statistical framing. Loss framing is when especially in adverts the language used is to illustrate to the reader the loss whether that be financially or medically if they don’t follow what the advert is saying, implicating a sort of fear and shock factor such as adverts on the dangers of drugs where they show the consequences of using drugs whether that be in a prison cell or in a coffin. Gain framing is when the language used illustrates to the reader what they can benefit from if they follow the message. For example the advert may be a 24 hour gym opening near the consumers home and may talk about the health benefits of going to the gym and the potential of attracting dating partners as you may seem more confident with a slim figure rather than having what is known as a ‘beer belly’. This type of framing is used to make the consumer believe that they can do what’s implied if they follow the message. Statistical framing is when statistics are used to get a point across. For example, during political elections the Conservative Party may say unemployment has fallen by x amount using Claimant count as a measurement but in …show more content…
Loss aversion is when people value losses and gains differently. For example, the glass is half full or the glass if half empty, here some people may have an optimistic view to this and know they still have half a glass of water left but some may have pessimistic view and see a glass half empty. The loss aversion theory tells us that people in general will avoid a loss rather than gain a reward. We often see this in marketing where the loss aversion theory is split into quarters. Firstly, there’s the ownership theory, when a consumer buys a piece of clothing for example they have 30 days to return the item, which eliminates the risk factor as they have the option to return the item but when that customer has that item they have a sense of ownership to that item so if wanted to be returned the customer may feel as if they’ve losing as they’ve spent time getting this item and will have to waste more time returning it. Another loss aversion theory that psychologists have described is the theory of scarcity. Here consumers may feel like they’re the only person without a certain item, so in order to not feel left out they will rush to buy an item to not miss out on getting something they wanted. The third part to the loss aversion theory is when purchasing a full price item and it comes with a free gift, but a singular bottle is at a discount. Here the theory tells us that the consumer will
Rationality in economics is described in the first principle which is that every agent is actuated only by self-interest (egoistic behaviour). …show more content…
As we know in economics preferences are split into three laws (complete, transitive and reflexive) whereas in psychology the preferences are altered by how the information is presented known as framing which can then be split into three parts, loss framing, gain framing and statistical framing. Loss framing is when especially in adverts the language used is to illustrate to the reader the loss whether that be financially or medically if they don’t follow what the advert is saying, implicating a sort of fear and shock factor such as adverts on the dangers of drugs where they show the consequences of using drugs whether that be in a prison cell or in a coffin. Gain framing is when the language used illustrates to the reader what they can benefit from if they follow the message. For example the advert may be a 24 hour gym opening near the consumers home and may talk about the health benefits of going to the gym and the potential of attracting dating partners as you may seem more confident with a slim figure rather than having what is known as a ‘beer belly’. This type of framing is used to make the consumer believe that they can do what’s implied if they follow the message. Statistical framing is when statistics are used to get a point across. For example, during political elections the Conservative Party may say unemployment has fallen by x amount using Claimant count as a measurement but in …show more content…
Loss aversion is when people value losses and gains differently. For example, the glass is half full or the glass if half empty, here some people may have an optimistic view to this and know they still have half a glass of water left but some may have pessimistic view and see a glass half empty. The loss aversion theory tells us that people in general will avoid a loss rather than gain a reward. We often see this in marketing where the loss aversion theory is split into quarters. Firstly, there’s the ownership theory, when a consumer buys a piece of clothing for example they have 30 days to return the item, which eliminates the risk factor as they have the option to return the item but when that customer has that item they have a sense of ownership to that item so if wanted to be returned the customer may feel as if they’ve losing as they’ve spent time getting this item and will have to waste more time returning it. Another loss aversion theory that psychologists have described is the theory of scarcity. Here consumers may feel like they’re the only person without a certain item, so in order to not feel left out they will rush to buy an item to not miss out on getting something they wanted. The third part to the loss aversion theory is when purchasing a full price item and it comes with a free gift, but a singular bottle is at a discount. Here the theory tells us that the consumer will