One of the fundamental capabilities of humans that have been exploited especially in the business world is their ability to make choice, in most cases, rational ones. Human beings are endowed with the capability to make prudent choices and decisions which the view of maximizing their experience or satisfaction. At individual level, any decision arrived is meant to the highest self-interest and bring the greatest satisfaction to the decision maker. This subjective view of the reasons why individuals make decisions reduces the logicalness of any decision to an individual level. Ultimately, rationality and logicality is reduced to a subjective matter that differs from one individual to another. Such reasoning, has in most cases, been adopted by
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This allows for ordering of the alternatives and evaluating the payoffs. However, such assumptions have drawn criticisms from different quarters including economists. The award-winning economist and political scientist, Herbert A. Simon, argued that decision making process by humans is not perfectly rational. He noted that decision ability is bounded by not only time and resources available but also by the limited cognitive skills and imperfect information available on the alternatives and payoffs. Considering these limitations, he suggested an alternative theory, bounded rationality theory, to explain human behavior (Kahneman 1450). Others have argued that markets and information are never perfect while individual choices are influenced also by their socioeconomic environment. It has also been argued that humans evolve and their preferences and constraints change with changing times and therefore are not fixed. Hence, the fixed pattern of behavior as postulated by the rational choice theory is impractical (Bhattacharyya, Pattanaik and Xu 2). However, economists who are proponents of the rational choice model have responded to such criticisms by taking advantage of the tractability and flexible nature of the theory to improve on its assumptions and grounding it more on science. By improving on its adoption of empirical data and testing, economists have …show more content…
These tastes and preferences play an important role in decision making. Acquiring these utilities or preferences is the highest interest. Therefore, as postulated by the rational choice theory, any decision made with the view of maximizing these utilities after evaluating the available alternatives based on the perfect information provided is considered rational. While the rational choice theory provides a plausible explanation for human behavior as individuals or collectively as a society or business entity, its assumption of the perfect nature of information and market is its main weakness. Moreover, agents evolve with time and their tastes and preferences are not fixed. These have been the tenets used by the critics of the theory. However, the flexibility of the theory has seen it evolve and accommodate new disciplines such as mathematics and therefore add an empirical edge to its deductions. Generally, the tractability and flexibility of the theory offer a good foundation for contextualizing human and societal behavior especially when it comes to decision
This allows for ordering of the alternatives and evaluating the payoffs. However, such assumptions have drawn criticisms from different quarters including economists. The award-winning economist and political scientist, Herbert A. Simon, argued that decision making process by humans is not perfectly rational. He noted that decision ability is bounded by not only time and resources available but also by the limited cognitive skills and imperfect information available on the alternatives and payoffs. Considering these limitations, he suggested an alternative theory, bounded rationality theory, to explain human behavior (Kahneman 1450). Others have argued that markets and information are never perfect while individual choices are influenced also by their socioeconomic environment. It has also been argued that humans evolve and their preferences and constraints change with changing times and therefore are not fixed. Hence, the fixed pattern of behavior as postulated by the rational choice theory is impractical (Bhattacharyya, Pattanaik and Xu 2). However, economists who are proponents of the rational choice model have responded to such criticisms by taking advantage of the tractability and flexible nature of the theory to improve on its assumptions and grounding it more on science. By improving on its adoption of empirical data and testing, economists have …show more content…
These tastes and preferences play an important role in decision making. Acquiring these utilities or preferences is the highest interest. Therefore, as postulated by the rational choice theory, any decision made with the view of maximizing these utilities after evaluating the available alternatives based on the perfect information provided is considered rational. While the rational choice theory provides a plausible explanation for human behavior as individuals or collectively as a society or business entity, its assumption of the perfect nature of information and market is its main weakness. Moreover, agents evolve with time and their tastes and preferences are not fixed. These have been the tenets used by the critics of the theory. However, the flexibility of the theory has seen it evolve and accommodate new disciplines such as mathematics and therefore add an empirical edge to its deductions. Generally, the tractability and flexibility of the theory offer a good foundation for contextualizing human and societal behavior especially when it comes to decision