Irrational

What does irrational mean?

In behavioral economics, the term "irrational" refers to behavior that is not in line with a specified standard of rational choice. The relevant standard must be stated, such as consistency among preferences or appropriate use of information.

Rational does not mean selfish

Rational choice does not necessarily mean selfishness or profit maximization; utility can include concern for others. Emotions and social concerns can influence choices, but their presence alone does not make a choice irrational. A bad outcome can also follow a reasonable decision under uncertainty.

Example of an irrational choice

Suppose two offers provide exactly the same item, timing and conditions, except that one costs more. If a person knows this and their only goal is to obtain that item at the lowest cost, choosing the higher price conflicts with the stated goal. The conclusion depends on those assumptions: a preference for supporting a particular seller would change the example.

Example: a choice you would not make

Someone may give money away because helping another person matters to them. Disagreeing with that priority does not show that the decision violates their goals or a rational-choice standard. Before calling a choice irrational, say which standard it fails.

Sources: Behavioural studies of strategic thinking in games, A Behavioral Model of Rational Choice.