We're all rational decision makers? Think again.

We say we make decisions based on an assumption of a rationality that maximizes. In reality, we are imperfectly rational creatures who make sub-optimal decisions. Time to re-visit our assumptions.

What modern research tells us is that we are imperfectly rational in two different respects.

The model [of rational choice] is not fine. Virtually all of the assumptions built into it about human beings and the world are false:

It assumes that people are self-interested. Well, yes and no. Self-interest is certainly part of what moves us, but we are also interested in the welfare of others (...), and even the world. And we are also interested in doing what’s right (...).

It assumes that there is a common scale of value on which everything can be compared. There isn’t. Sure, we can assign value numbers to things like salary, colleagues, being close to our families, and the like, but in doing so, we are only kidding ourselves that these numbers actually represent a common underlying metric. Tradeoffs are hard to make, and often can’t be made formulaically. (...).

It assumes that we can attach meaningful probabilities to outcomes. Sometimes we can, but life is not a roulette wheel or a series of coin flips, in which probabilities are well defined. The world is a radically uncertain place, and we deceive ourselves if we think we can always attach numbers to our uncertainty.

via Barry Schwartz.