Rationality, rational behavior

Degree of rationality and irrationality

Rationality is an aptitude to avoid ...blunders (irrationality),
a consistency between decisions and goals.
We better improve our degree of rationality!

But absolute rationality is a myth.
It is bounded by mental and behavioral biases that might bring
suboptimal or even disastrous results.

Irrational behavior can come either from unwise goals and intentions
or from poor decisions even if the goal is rational.

In economic and financial areas those deviations from the rational
choice, and the related market anomalies, are extensively studied.
Here, the notion of rationality lead to the concept of utility
maximization, also partly illusory.


Getting optimal results is the key.
But what about traps within the brain?

What is it?

How to define rationality ...rationaly?
And by avoiding
obscure academic wording?

       Well, as the aptitude to avoid
 brain mental and behavioral danger blunders.

In other words, rationality is

The capability
to behave in a way that gives the best
chances to obtain optimal outcomes.

=> This supposes that the decision decision making process takes
       into account the two main factors:
  • The realities: the current situation and the related prospects.
This supposes a quest for truth, even if it is rather
illusory (*) to reach it fully in our
complex, evolutionary,
ambiguous and fog uncertain worl
d (see fuzzy
logic)
(*) Sorry, Aristotle not to follow you,, as seen below in this
article.
This concerns not only individuals, as organizations also have
their goals, which interfere
with those of their members.

To detail further the rational process, it is a consistency, a well
balanced square,
between:
    • Our decisions / actions.
    • Our preferences, intentions, goals.
    • Our capabilities.
    • The situation we face.
Are people rational?
What about
distortasymm biases and sillymad irrationality?

The pros

We are a smart species, aren't we?


Some social, economic and financial theories (rational choice, efficient
market, economic man) assume that in general people act rationally,
at least when their economic interests are at play.

Those theories link rationality to
expected utility,
which economists define as an objective valuation by economic
players of
* the win gain prospects,
* the
risk risk entailed (modulated by the decider's risk
    aversion
).
The cons
We are prone to blunders, aren't we?


To define rationality, even in economic decisions, only as the quest
of
one's personal economic interests is a rather narrow approach
(the "economic man" myth).

To define it as a quest for an optimum way to reach ones' goals,
provided of course those
goals are not destructive, seems a
better approach (as detailed in a section below)

But everyday life, as well as scientific studies,
show that
reasonings, attitudes, decisions and behaviors, can stray
from the above mentioned "rational" criteria.  What happens
is that
mental and behavioral biases affect:
  • Our intellect (cognition),

  • Our feelings (emotions)
  • And our habits (automaticities).
=> Those flaws, limitations and errors, either individual or common
       to a group or society, bring often suboptimal outcomes,
and can
       even cause harmful actions.

The quest for absolute rationality is a bit illusory and somewhat
akin to a myth (*), even if it is advisable to behave in a way that makes
us close to that ideal.
(*) like the quest for absolute truth, sorry Aristotle for your binary
      100% true or 100% false theory.
See fuzzy logic
      Sorry also all fanatic preachers for such an absolutism. 
Rationality and irrationality rarely exist fully among Earthlings.

=>
What is usually observed is "bounded rationality" (*), or
        degrees  of rationality.

Human and social phenomena are rarely clear cut !
(*) a concept invented by Herbert Simon

It is not so easy to juggle all the time with balls of different sizes
and weights, such as our intentions, our capabilities, the group
contagion and our own impression about the situation, so as to
take the decision that will give the optimal result.

Kinds of rationalities / irrationalities:

Are intentions OK?
Do goals match intentions ?
Do means match goals?

Rationality/ irrationality by design

Are all intentions rational?

The problem here is about the nature of our
goal intentions /
goals
.
Do we make a wise choice of goals ? Have we consistent intentions?

Irrationality can be said "by design" when those goals / intentions are:
  • Obsessive and self-destructive.
  • Or at least unrealistic / unattainable.

Operational rationality / irrationality

Do action actions fit intentions?

Do we take decisions and make moves that are efficient to reach goals,
that bring a good
match between actions and intentions and that fulfill
some optimal ratio between means,
time and results?

Operational / procedural irrationality relates to flawed decisions and
to behaviors that
go against our goals even if they are positive
and realistic
,
because of the mental biases mentioned above.

Also the border between those two rationalities,
by design vs. operational, is like many things in life, kind of fuzzy.
Everybody knows how means can pervert goals.

From intentions to consequences

It can be debated what happens when the goals themselves can
be deemed irrational
, as going against the decider "interests",
and specifically its most fundamental ones, its survival for example.


Well, even in such cases there might be another kind of logical approach:
  • directly based on higher intentions
(ethics notably, which privileges to some degree other people's
interests),
  • supposing of course that those intentions are not illusive
 or naive. Thus beware of:

* "
Unintended consequences and perverse effects", as "Hell is
    paved with good intentions".

Flimsy or unconscious motives such as fancies, whims,
    addictions, reflexes,
emotional override or cognitive illusion.

*  And of course abusive social mimicry.


Oh, btw, a trickier question: can bad intentions and plain hatred be
rational? At first sight, it seems they are not, but it is a debate for
classical tragedy writers and philosophers...


Also there is a difference between
  • Efficiency,
a narrow quantitative criteria that focuses on reaching goals
in an optimal fashion when comparing means and results.
  • And effectiveness or wisdom,
It addresses not only how the decisions match the goals, but
the overall quality of the move, agregating all positive and
negative consequences
.

Anyway people might have the belief that a goal serves their interest,
or if not that it serves a higher purpose, although in reality it might
work against both..

The economic case: rationality and utility

Rationality in sous economic decision has been closely studied by classical
economists.
They brought the notion of "economic
utility maximization"

It can be either individual or collective utility, the various economic
thinking schools diverge on that matter, and much blood was spilled
as a result  of those divergences.

A rational economic
decision is one that has a good chance to bring an
optimal
balance between
* The risk taken
* The expected payoff.
This notion might explain some phenomena.

But it is reductive: economic goals are only a part of people
(and
groups) motivations and interests.


They have also non-economic criteria, either conscious or unconscious,
empathic or heinous.
Even so, various economic decisions fail to reach their goal,
or can even give
perverse results,
* not only because of the
uncertainty of the World,
* but also of irrational behaviors, as
behavioral economics researchers
   have found.

For practical details

The phenomena that perturb rationality are detailed
in the main article on the topic:
Behavioral bias.

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