Behavioural Economics (and related marketing research) has great potential for practical application. There are a number of things that people reliably do that cause them problems. So advice can help improve this. Presh Talwalkar has a book on improving decision making — The Irrationality Illusion — that offers some tips for making decisions more rational. This might lead to what some people would like to call “Rational” Decision Making.
Discusions Of Perfect Decision Making Often Are Not Useful
I have a lot of sympathy with the argument that we have to get past discussions that revolve around whether people are perfect decision-makers. I don’t know anyone who thinks they are. As such. the sort of practical advice he gives is welcome and there are a decent number of good ideas.
When considering overspending he suggests that “The rational response: Periodically analyze your account balances to see if you are staying on track” (Page 41). This makes a lot of sense for a lot of people. Still, I’m nervous about classing it as “the rational response”. At the risk of being too academic I do have a concern with the aim of making decisions more rational without being too clear on what rational is. I believe that a commitment device (i.e. leaving behind our credit cards when we go shopping) is seen as rational here. I’m all for commitment devices but such a deliberate reduction of options could be thought of as non-rational in traditional economic logic. When then is a commitment advice rational and when not? It depends a lot on the person and precise circumstances.
What Is Wrong With Enjoyment in “Rational” Decision Making?
I’m not sure it is irrational, as the author implies, to wait in a lengthy queue for a new product or movie if you find it fun. (Although I personally think it is very odd). In general, the author is happy to use his own view of what rationality is. I mostly agree but that can be dangerous if we decide what others should want. He doesn’t like brand preferences that aren’t well informed and can’t be blind taste-tested. Yet, what if the experience of having a Coke, not necessarily the taste, just makes you happy. That seems perfectly ‘rational’ to me, if by rational we mean something that aids the decision-maker’s well-being.
Still, that is certainly me being picky. I accept practical advice is useful. Hopefully, some will benefit from this, and similar, advice.
For more on rationality see here.
Read: Presh Talwalkar (2016) The Irrationality Illusion: How To Make Smart Decisions And Overcome Bias, CreateSpace Independent Publishing Platform