Chapter 3Rational Decisions

The Science of Decision‐Making

Decision theory is the field of study focused on decision‐making. Those who work in the field tend to concentrate their efforts in one of the two main disciplines, normative and descriptive. Normative decision theory is the study of how we should make decisions. It makes heavy use of statistical analysis and requires an understanding of probabilities. Normative decisions are made objectively, without emotion and can be repeated by following a systematic pattern of behavior. The goal is a rational decision.

A decision is considered rational when the decision maker does what is most reasonable given all the relevant information available at the time the decision is made. Rational decisions are what we aspire to achieve. They are optimal. On the other hand, a decision is considered right if the outcome is at least as good as all other possible outcomes. In other words, it is considered right, because the actual outcome was successful. Importantly, rational decisions are not necessarily the same as right decisions, and the decision that winds up being right may not have been rational. The key difference between the two is that a decision can be deemed rational versus irrational at the moment it is made, whereas the assessment about whether it was right or wrong can only be made with the benefit of hindsight.

Take the example of two teens, Brian and James, both of whom attended a late‐night party where alcohol was consumed. ...

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