Reflections on rational choice—The existence of systematic irrationality

The behavioral challenge to the rational choice paradigm is oriented toward individual decision-making. Behavioral irrationality does not mean chaos. Most irrational behavior involves the exercise of reasoning. In reality, decision makers do not behave with full knowledge and/or optimal computational power in pursuit of maximizing expected utility. Besides reviewing critiques to the rationality paradigm for judgments and preferences and exploring the impact of culture on people's economic behavior, this paper is the first to call the attention of researchers to the phenomenon of systemic irrationality. Irrationality may exist at the aggregate or societal level, a conclusion based on the observation that large segments of the population are incapable of making decisions in accord with traditional rationality—groups such as those who have a psychiatric disorder, those who are taking medications, those with limited intelligence, those from the lower social classes, children and adolescents, and the elderly. Even those who are not included in the aforementioned groups, but who take medications for medical conditions may have their decision-making impaired to some extent. Therefore, it is argued that rationality in economic decision-making may be the exception rather than the norm.