Rational and Irrational Behaviors
Recall what you have done in the past few years of your life, you went to school(or work), you hang out with your friends, you watched TV, you bought a bag of banana. Are these actions purely low-benefit repeated behaviors done by habit or behaviors conducted after consideration? Thinking of the difference between animals and human beings, it is the language and science that distinguish them from each other. There is no doubt that rational and irrational behavior play an important role in either the everyday life of an individual or the development of the society. In this essay I will discuss the definition of rational and irrational behaviors, their usage in ordinary language, psychology, computer science, economics, and the degree of their influence to the investors of stock market.
'Rationality' means in colloquial language 'sane' or 'in a thoughtful clear headed manner'. In Rational Choice Theory 'rationality' simply means that a person reasons before taking an action. A person balances costs against benefits before taking any action. ( http://en.wikipedia.org/wiki/Rational_choice_theory)
When searching the definition of rational and irrational behaviors on Google, hundreds of results can be found. For rational, the most general version of the rational behavior posits that “the choice of individuals among the behavioral alternatives open to them is determined by their preferences and constraints. Actors choose the alternative that maximizes their utility.” Or, rational behavior is “the notion that people make decisions based on the desire to obtain the greatest amount of satisfaction.”(http://www.sistema.com/utility/glossary?rid=23579&apage=14). And in oxford dictionary, rational behavior means behavior “consistent with or based on or using reason.” Besides, from wikipedia, “Irrationality is cognition, thinking, talking or acting without inclusion of rationality.” “Irrational behaviors of...