Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Reality shows, fashion parades, cricket coaching classes, entreprenurship- what binds them together?????

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What makes people attract towards reality shows? Why do you see such a craze among parents to put their wards for cricket coaching classes? We see mushrooming of cricket coaching centres each advertising that the kid is a potential IPL player? Similarly what makes a industrialist like N,R.Narayana Murthy a role model for many a family? If this is not enough, take the craze for shopping festivals and modelling contests or fashion parades.

Each of these activity may seem disconnected yet a common chord binds these all. People respond to incentives. A reality show winner is a kind of role model of many others aspiring that success and the rewards that come along with that success. the chances of success are not high yet the fact if we win, we hit a jackpot make the people crazy.

One will not produce a Tendulkar, Richards or Dhoni or Steyn everyday. the success and the accompanying rewards that one gets makes kids and their parents want to try hand in cricket. Along the line at certain point you realize that you are not cut out for it and drop from the race. Yet for many they may still fancy a chance or two and may continue even past their peak.

It is a like a pyramid. there is asymmetry in terms of rewards at the different levels of the pyramid. Very few will reach the top of the pyramid but the desire to reach that top by being one of the chosen few will keep most of the others going. this is true not only in sports or films or modelling or entrepreneurship but holds good in each aspect of our lives.

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