4 Ways We Are Not Rational And How It Affects Economics

At the core of economics (especially economics teaching) is the idea that people are fundamentally rational, self-interested, utility maximising individuals who make decisions after logically considering all the relevant facts. As these people know best what’s best for themselves, these decisions are optimal for society. However, one of the newest and fastest growing school of thought is the Behavioural School which uses the insights of psychology to show that this simply is not the case. These insights are sometimes viewed only in isolation or glossed over as minor trivia. However, when you put all the different pieces together, you see that the conclusions are far reaching for how the economy operates. Continue reading “4 Ways We Are Not Rational And How It Affects Economics”