The Great Rationality Debate

How do people make decisions? How do we judge whether a decision is good or bad? In this chapter, we describe how the quality of a decision is determined by how it is made. We judge the quality of a decision by whether or not it meets the normative expectations of rational choice theory. Historically, this meant that decisions should be made to maximize personal wealth or that we should choose the options that have the highest value. However, people rarely make decisions that maximize wealth or value. To explain this, we discuss the relationship between expected value and subjective utility. We discuss decisions where people fail to make decisions that are good according to rational choice theory. These choice anomalies and paradoxes are potentially difficult for anyone with an optimistic view of human rationality. We conclude by discussing different perspectives on the rationality of human decision-making.