Humans are responsible for making various decisions on a daily basis. Some may be relatively simple, such as deciding what to eat for breakfast, whilst some may be more serious, such as accepting a job offer. As our lives change, it can be assumed that we may also have to make decisions to adapt to these life changes; whether they are rational or irrational decisions, however, is another question. This, therefore, allows us to pose the question as to whether humans are even rational decision makers at all. To determine the answer to this question, we must first define what is meant by decision making; Wang and Ruhe (2007) define decision making as one of the basic cognitive processes used to choose a preferred option or action from a set of alternatives, which are all based on particular criteria. Various models and theories attempt to explain the way in which humans make choices; the two primary models being the normative model, which focuses on how we should make decisions, and the descriptive model, which focuses on the existing cognitive processes that are used for decision making (Beresford & Sloper, 2008). Consequently, this essay aims to address these models and their theories in which to show that humans are rather susceptive to using methods which lead to irrational decisions, and therefore, fail to make rational decisions.
The normative model of decision making creates an ideal of a rational decision maker; the model proposes that with this method of decision making, certain axioms of rational behaviours are followed (Wange & Ruhe, 2007). Therefore, it was from this idea of normative decision making that the expected utility theory (EUT) came to exist. The EUT is one which is based on probability and focuses on risky decision making. The theory proposes that the decision maker should be comparing the expected utility values of the choices that they have in front of them. The way in which the choice is given value is by multiplying the probability of the outcome by the utility of the outcome (Mongin, 1997). However, one issue in regard to the theory is that it does not take into account that the outcome may have much more value for one person than it does for another; this then means that it becomes difficult to differentiate between what is a rational decision and what is not. Despite this issue, the St Petersburg paradox (Aese,1998) provides support for the suppositions of the theory about human decision-making as it demonstrates that individuals attempt to maximise their expected utility; this, therefore, indicates that humans may in fact be rational in their decision-making as they would be following the normative model.
Although there is supporting evidence for the EUT, there is also ample evidence which suggests we use other methods for decision making. The Allais paradox (Allais, 1953, as cited by Hardman, 2009) is one prime example, which actually directly opposes the propositions of the EUT; this is because it demonstrates that people do not always approach decision-making in a way that will maximise their expected utility; it is also not the only opposing evidence for the methods put forward by the EUT. Shortly after the EUT was proposed, theories underpinning the descriptive models of decision making, which explain how we actually make decisions, came into light.
Kahneman and Tversky (1974) state that, when confronted with problems that require decision making, we often rely on heuristics and biases to deal with the issue at hand. This may put us at a disadvantage, as the use of these heuristics, more often than not, lead to irrational decisions (Eysenck & Keane, 2010). This led to Tversky and Kahneman (1974) proposing varying heuristics and biases that they thought lead to poor decision making when used. One of these heuristics is known as the representativeness heuristic. The underlying ideas of this heuristic state that we make decisions based on how well, or not so well, the information has been represented to us. An example may be shown with a study that was carried out by Kahneman and Tversky (1973, as cited by Eysenck & Keane, 2010). Participants were given a description of somebody and were told to guess his occupation from the choices that they were given. The study found that the participants would ignore the base-rate information given to them and would instead base their decision on stereotypes that they already had. Therefore, when using the representativeness heuristic, an individual will judge the probability of an event based on the representation of it within a population (Tversky & Kahneman, 1972). Despite the use of this heuristic, it does not mean that an event which is more representative is synonymous with a more likely occurrence (Kahneman, Slovix & Tversky, 1984); this, therefore, indicates the way in which representativeness heuristic may lead to irrational decisions if used.
There are far more factors that affect decision-making than those already mentioned. With further studies being carried out within the area, and decision-making being described as emotional and not logical (Camp, 2018), human emotion should be considered as a strong factor within decision making. Human emotion has been described as a powerful, pervasive and predictable driver of decision-making (Lerner, Li, Valdesolo & Kassam, 2015); in fact, the psychological literature presents to us many ways in which human emotion can impact decision making. Lerner et al. (2015) distinguishes between eight different themes of emotion in regard to their impact on decision making; these themes include the involvement of integral emotions, incidental emotions and specific emotions as well as emotions shaping decisions through the content of thought, depth of thought and through goal activation. Emotions influencing interpersonal decision making and unwanted effects of emotion are also considered a part of the eight distinct themes. To go into further depth, we may look at the effects of the various themes in isolation to one another. Lerner et al. (2015) suggest an example for the way in which integral emotion would impact decision-making; they state that there could be a situation where somebody is feeling anxious about the outcome of an uncertain choice, and so chooses the safer option as opposed to an option which may be more beneficial and lucrative for them; this also opposes the view of the EUT which states that we attempt to get the highest utility out of an event. Therefore, this is a clear indication of emotion having a negative impact on rational decision making.
Despite evidence supporting the normative expected utility theory, it is evident to see that human decision-making is more complex than assigning choices with a subjective value. The normative approach towards rational decision making believes that we compare values when confronted with choices; however, this essay has shown that human decision-making is not this clear-cut. This essay has provided various other factors that mankind has become prone to using when decision-making, such as the representativeness heuristic proposed by Kahneman and Tversky (1972) which states that we are susceptible to basing our judgements on existing information, and therefore ignoring key information. Additionally, emotion was also looked at in terms of its effect on decision making and Lerner et al. (2015) provided eight individual forms of emotional impact; they suggested an opposing view to EUT that the use of emotion in this context actually leads to missing out on lucrative opportunities. Therefore, to conclude, humans may be rational decision makers some of the time, but are very susceptible to using heuristics and biases as well as emotion when decision-making, which ultimately lead to irrational decision-making.