Rational Decision-Making: Profit, Risk, and Time
Rationality: Making Decisions
If problem-solving and logical reasoning are fundamental characteristics of human intelligence, another element ultimately determines the range of that power: rationality. This human rationality is the faculty that allows us to assess the impact over a period of time and calculate costs and benefits. This is possible because humans can assess means and find the best solution to a problem. However, the solution offered does not necessarily have to be the most rational.
In general, we choose decisions that give us a higher profit or those that pose less risk. In some circumstances, decisions are complicated because different variables must be calculated. In many cases, depending on how the problem is formulated, our decision varies.
In general, we make decisions that minimize or avoid losses. By contrast, people cling tightly to what they already have; where they have an appreciable gain, they feel an aversion to risk.
These experiments have been tested with surprising efficiency on a feared group of characters: the employees of Treasury. Numerous tax increases have been “strained” between ordinary people following this system to state the percentages in profits and not losses. Again, this proves that we are poor, miserable, and extremely manipulative.
Factors Influencing Rationality
There are two other elements that influence the rationality of our decisions: (a) depending on the time period and (b) depending on the number of agents making a decision.
Regarding the period of time, our rationality tends to weaken to the extent that the objective to reach is temporarily further away. For example, if we have a very important review several months away, we tend to set a study schedule from the beginning, but we don’t follow it until it is closer, and then we do not have time to study. It has also been demonstrated that adolescent psychology does not take the long term into account and only considers the benefit in a short period of time.
Regarding the number of agents who make decisions, the possibility of a rational agreement is complicated to the extent that profits are not clear to all actors and depend on the actions of others. As the consensus among the members crumbles, the chances of an agreement will be wise for all. Selfish acts are more clear than altruism in such cases. These two variables are clearly influential for some problems of our time, such as the ecological crisis.
Consequences: Ecology and the Limits of Rationality
a) First, we do not reach an agreement because the temporary nature of these decisions goes beyond our direct calculation of consequences. The “urgency” of a problem is not as serious in its consequences but because of its proximity or immediacy. Thus, the ecological problem is a problem in the medium term (relatively) that tends to be postponed again and again. Making it even more difficult by the fact that agents also do not know exactly the degree or percentage of damage they will correspond to, there will always be benefits from global warming, for example.
b) However, there is an even more serious objection to taking serious action against the ecological problem. Why not come to an agreement or a decision on green within the capitalist economy is a classic of “game theory”: the impossibility of sustaining voluntary cooperation between two individuals when uncertainties surround its action. This is what is known as the “prisoner’s dilemma.”