‘Rational’ decision-making

A recurrent issue in social psychological research is whether human social behaviour can be said to obey ‘rational’ rules. The term ‘rational’ is a dangerous one, and may be used in different contexts to imply ‘reasonable’, ‘ethical’, ‘involving conscious thought’, ‘sensible’, and such like. The notion of rationality as used by psychologists does not necessarily make any assumptions about ethics or consciousness, but is applied to the relationship between decisions and expected consequences. It is very much a utilitarian concept, based on the comparison of expected costs and benefits. For this reason, many of the theoretical assumptions used in this field have been borrowed directly from economics, and mathematical models of economic desirability have been adopted as working hypotheses about how everyday decisions are made.

The cornerstone of utilitarian conceptions of rationality is the notion of expected value (EV). Quite simply, to calculate the expected value of any choice, one evaluates the possible consequences, multiplies these evaluations by the probability that each consequence will occur, and adds up the products. If all that one wants to do is to maximize one's profits and minimize one's losses over a long sequence of choices, the strategy to adopt is always to choose options with the highest EV. This is not at all the same thing as choosing the option that could produce highest profits. If high profits are very improbable, the product of high profit and low probability could be lower than the EV for an option that provides a smaller profit with greater certainty.