Management research: we aren't rational

We don't act rationally.

Just as I was getting used to the notion of behavioral economics, the Harvard Business School's Working Knowledge series introduces me to the idea of behavioral operations. From the June 19 "First Look," a weekly summary of the school's current faculty research:

Like behavioral economics, behavioral operations attempts to understand the rational and irrational tendencies in human beings. In a new working paper available for download, the authors explain what behavioral economics means in both a theoretical and a practical sense. "We know many things now about biases such as sunk costs, framing, and the planning fallacy, to mention just a few, but how those affect the behavior and performance of operating systems is still unexplored. This will require the development of novel conceptual insights," they write.

The full paper (PDF), which applies cognitive research to management, is here.

Business theorists are certainly not alone in this regard. Results from game theory also suggest that the notion of rational choice is flexible.


Wikipedia: behavioral economics, decision theory