How Do You Make Decisions?

There is an old joke about an economist who won the Nobel prize for developing a rational based decision-making model. Following the award he was offered a new job and met his friend to discuss what he should do. The friend suggested he use his prize-winning model to help make the decision. The economist thought for a moment and then responded, “Don’t be ridiculous, this is serious”.

Economists have long believed we make decisions in a rational way as a result of a detailed examination of all possible options, outcomes and likely benefits.

Others see flaws in the notion that humans are rational and that we make decisions based on logic only after considering all the facts.

More recent thinking on decision-making suggests we are not only influenced by logic but also by our emotions, expectations and biases.

The extent to which our emotions affect our decisions and feelings such as anger and fear influence us when making choices is also a factor.

Economists may find this approach a little haphazard, as it suggests we don’t calculate every detail before we make a decision.

A more recent view suggests we make choices based on our knowledge of what worked in the past and is therefore likely to be successful in the future.

We also make decisions by learning from others and seeing what has worked for them, particularly when we lack necessary experience and information.

In a similar way, we are naturally good at copying the behaviour of others particularly when our survival is at stake or we feel threatened.

Another view suggests we are influenced by our particular needs at a point in time such as when we are tired, hungry or thirsty.

Much to the confusion of the economists we also appear to take other people into account before making decisions, even though considering others in this way isn’t seen as a purely rational act.

SO, the economists may continue to believe decision-making is a rational process but in the reality of our daily lives we know many factors influence the decisions we make.

What do you think? How do you make decisions? Get in touch we would love to hear your views contact Nick on 028 8224 9494 or via Twitter @nick_oec.