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In general usage, one is said to be rational if one is sane or lucid. [15] In economics, rationality means that an economic agent specifies, or acts as if he implicitly specifies, a way to characterize his or someone's well-being, and then takes into account all relevant information in making choices so as to optimize that well-being.
In economics, rationalization is an attempt to change a pre-existing ad hoc workflow into one that is based on a set of published rules. There is a tendency in modern times to quantify experience, knowledge, and work. Means–end (goal-oriented) rationality is used to precisely calculate that which is necessary to attain a goal.
Bounded rationality was coined by Herbert A. Simon, where it was proposed as an alternative basis for the mathematical and neoclassical economic modelling of decision-making, as used in economics, political science, and related disciplines.
Marketers can take advantage of rational ignorance by increasing the complexity of a decision. If the difference in value between a quality product and a poor product is less than the cost to perform the research necessary to differentiate between them, then it is more rational for a consumer to just take his chances on whichever of the two is more convenient and available.
Practical rationality, on the other hand, aims at non-epistemic goals, like moral, prudential, political, economic, or aesthetic goals. This is usually understood in the sense that rationality follows these goals but does not set them. So rationality may be understood as a "minister without portfolio" since it serves goals external to itself. [1]
The concept of economic rationality arises from a tradition of marginal analysis used in neoclassical economics. The idea of a rational agent is important to the philosophy of utilitarianism , as detailed by philosopher Jeremy Bentham 's theory of the felicific calculus , also known as the hedonistic calculus.
Imagine there's a game where one person is placed in a room and assigned the role of the "sender." A second person in a different room is assigned the role of "receiver." The sender is given $20 ...
Philosophy and economics studies topics such as public economics, behavioural economics, rationality, justice, history of economic thought, rational choice, the appraisal of economic outcomes, institutions and processes, the status of highly idealized economic models, the ontology of economic phenomena and the possibilities of acquiring ...