Environment of Low-Rational Preferences: Individual and National Features

Abstract

The motives which guide an individual making an economic choice traditionally attract attention of economic science. However, there is a certain lack of choice models oriented towards people’s irrational inclinations, which to an essential degree determine their economic behavior along with rational motives. The goal of the present research is to form a choice model which takes into consideration the expanded structure of demands that determine an economic individual’s choice in actual practice. The article provides a detailed overview of approaches of various economic schools to the nature and the extent of behavioral rationality of such an economic individual. Based on the broader view on decision making motives as well as the analysis of evolving limitations, the author introduces the term ‘low-rational managerial behavior’ as a mechanism of implementing the foregoing preferences, and presents examples from business practice. The author reviews the low-rational behavioral features inherent to dominating shareholders of companies. It is noted that their low-rational priorities affect such areas of business operations as establishing the organizational structure and the choice of CEOs, which results in resolving the agency problem. In conclusion, exemplified by BREXIT, it is shown that lack of attention to low-rational preferences not only prevents an accurate prediction of their choice, but can even change the course of a whole country. At the same time, taking these factors into consideration helps evaluate more clearly the real motives of individuals’ behavior