"Leaky" Rationality: How Research on Behavioral Decision Making Challenges Normative Standards of Rationality

For more than 30 years, decision-making research has documented that people often violate various principles of rationality, some of which are so fundamental that theorists of rationality rarely bother to state them. We take these characteristics of decision making as a given but argue that it is problematic to conclude that they typically represent departures from rationality. The very psychological processes that lead to "irrational" decisions (e.g., framing, mental accounting) continue to exert their influence when one experiences the results of the decisions. That is, psychological processes that affect decisions may be said also to "leak" into one's experience. The implication is that formal principles of rationality do not provide a good enough normative standard against which to assess decision making. Instead, what is needed is a substantive theory of rationality-one that takes subjective experience seriously, considers both direct and indirect consequences of particular decisions, considers how particular decisions fit into life as a whole, and considers the effects of decisions on others. Formal principles may play a role as approximations of the substantive theory that can be used by theorists and decision makers in cases in which the formal principles can capture most of the relevant considerations and leakage into experience is negligible.