Breaking the Rationality Assumption

Author(s)	Shraddha Ramsinghani
Country	India
Abstract	This paper explores the role of Behavioral Economics in understanding how psychological factors influence consumer decisions, often leading to irrational choices. Traditional economics assumes rational decision-making, but in reality, emotions, cognitive biases, and social factors drive behavior. The paper highlights how illiteracy impacts decision-making, forcing short-term thinking over long-term benefits. It also discusses how psychological barriers like overconfidence, peer pressure, and emotional responses prevent rational decisions. Several Indian government policies, such as the Population Control Policy, Reservation System, and Demonetization, are reviewed to show how poor execution can lead to negative consequences. The paper concludes by emphasizing the need for better education, critical thinking, and informed policymaking to improve decision-making and empower people to make rational choices. Effective decision-making requires understanding both economic and psychological factors, which can lead to more balanced, thoughtful choices for the betterment of society.
Keywords	rational, critical, decision-making, economics, irrational, psychological
Field	Arts
Published In	Volume 6, Issue 5, September-October 2024
Published On	2024-09-26
Cite This	Breaking the Rationality Assumption - Shraddha Ramsinghani - IJFMR Volume 6, Issue 5, September-October 2024.

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