Is it irrational to splurge on a luxurious dinner one night?
In the field of economics and decision theory, rational behaviour is often portrayed as the gold standard, the ideal where individuals make choices that maximize utility, or in simpler terms, bring about the best possible outcomes. But what if this notion of rationality isn't as straightforward as it seems? In the behavioural science field, it is often argued that our behaviour is often 'irrational', driven by perceptual or cognitive biases that distort our decision-making processes. These biases create what economists and psychologists refer to as anomalies, deviations from the rational model. Heuristics and biases very often receive bad press: 'This person spends their savings on a luxurious dinner because of present bias.' However, rather than viewing heuristics and biases as inherently negative, we should embrace their potential to guide us towards adaptive decision-making. It's essential to recognize that these 'anomalies' don't exist in a vacuu