Irrationality is thinking, acting, behaving or
talking without inclusion of rationality.
Rationality is the quality or state of being
reasonable, based on facts or reason. We evaluate each and every possible
steps, cost and benefits from doing something or not doing that activity. Come
up with proper reason and select or avoid decision.
So irrationality doesn’t involve rationality.
As tradition economic believes that people always behave rationally in every
situation. But is it really happen????
Ex:-
You are roaming at forest and lion comes and stand in front of you. At that time what will you do?
Do
you think about all options, cost and benefits? What’s the cost of running?
What’s the benefit of running?
NO
We just start running as fast as we can.
Thus, at that time our emotion replace on our
thinking system and order to run as fast as you can.
So Irrationality is about the forces that drive
our behavior that can be economic forces, social forces.
As when we come to the policies, we just can’t
consider only standard economy. We think about society’s care and take a
broader picture, broader perspective that just not included only rational. We
also have to include what we know about human nature.
We had seen stocks bubbles (Sub-Prime crisis,
IT bubble, etc.), people over extending limits of credit cards, taking
mortgages, etc. in which where we can see the rationality???
Rationality says that people are strong enough
to calculate everything, consider all options then make decision but in real
world people are confused, have an emotions, not every time thinking about
future, fall in love and so on.
So that people behave irrationally most of the
time which not included under standard economic and pre-assume that people
behave rationally.
We rely on contextual information to make all
sorts of judgments and decisions. Illusion under us is that we know the answer,
we know the right thing to do. But in fact we are wrong. That is just a mental,
visual illusion many a time which shape our decision and judgments.
Ex:-
See the below picture…… at top what color is it
look like?????
Your answer is its look like brown.
Now, at the bottom one what color is it look
like????
Your answer is its look like orange.
You can’t see both the color as an identical.
Let’s see now….. Cover all side and what both
color is it look like???? Is it identical????
Now, our answer is yes both the colors are
identical.
It is a visual illusion which drives our
decision of those both colors are not an identical.
But is it really????
No, In fact those both colors are identical.
Thus, illusion which drives our decision.
Many times we took decisions which are driven
by some of the forces and those are not be a rational. We are human and we
makes some mistakes repeatedly again and again but benefit of being the human
is that we can identifies our mistakes and can take steps for improvement.
See the above video and get more insights.....
