When we make decisions, we make mistakes. We all know this from personal experience, of course. But just in case we didn’t, a seemingly unending stream of experimental evidence in recent years has documented the human penchant for error. This line of research—dubbed heuristics and biases, although you may be more familiar with its offshoot, behavioral economics—has become the dominant academic approach to understanding decisions. Its practitioners have had a major influence on business, government, and financial markets !
Fouad Bendris’s insight:
Irrationality’s RevengeAlmost as soon as von Neumann and Morgenstern outlined their theory of expected utility, economists began adopting it not just as a model of rational behavior but as a description of how people actually make decisions …
Source:: Strategy & Governance