Are people rational or irrational?

Risk management is mainly a mathematical exercise, and the assumption of rationality is there to make the math easier. It is more like an axiom than a philosophical assertion that a certain group of people are in fact rational.

Read some social psychology research sometime. A group of people is almost always much less rational than any given individual within the group.

I can only speak for myself. I am mostly rational with moments of irrational thought. Those around me seem mostly irrational.

Is this in regard to making investments, or all risks?

SueBee - The way I meant it, it's more a question of ir/rationality - the stuff on risk and markets is how I came up with the question.

I think it's harder for individuals to be irrational in a business situation than for groups. Groups of people fall prey to groupthink and convince themselves that all kinds of ludicrous things are okay and reasonable....

humans in packs are highly irrational. perhaps the economists are imagining a group of individually-motivated (working for themselves, not the group) players?

In-duh-viduals are in general very irrational. However, putting a bunch of irrational prople together will give you a rational (predictable) outcome. It's anti-intuitive, but practice demonstrates this. It's kind of like how individual people are smart, but a group of people is very stupid.

i jus' picked da OOO cuz it sounds nice. "ooooooooooooooo"

I believe that people are mostly irrational, but with a very complex system of beliefs layered on top that make them look rational. Or, put another way, it is irrational to behave as rationally as we do.

So an individual may make what look like very rational career choices that propel them towards critical acclaim and personal wealth, but inherently may be driven towards such goals by a mostly irrational interior landscape that leads them to believe that right over the next achievement is the most wholly and satisfying external validation. So we are, in this belief system I'm describing, split- we behave "rationally" for "irrational" reasons. If you ask any individual why they did something, they can almost certainly rationalize it very cogently (if taught the simple skills of cogent communication) but not necessarily see outside of that rationalization. ("I threw that wrapper on the ground because we are in the middle of a city- there are people who's livelihoods depend on being street sweepers, and besides, it's a city, no one expects it to be pristine"). Rarely do people understand how they _feel_ about an issue- more frequently we only have access to how we _think_ about an issue.

I like to think I'm reasonably rational when it comes to finances, but I know I'm not even a little bit efficient!

I think groups are more likely to be irrational than an individual. One reason I think this way is that with a group, you have a million people with a million different solutions to a problem, causing complete chaos. The other reason I say this is when I think of the word "group", I think of a church, cult, or government body (None of which is very rational).

too many choices to be rational!

I work for Rational. ...and my Myers-Briggs personality type is Rationalist.

I feel rational.

It occurs to me that there are two possible meanings to "group" which I have different answers for. One group is a group of people working in concert, such as a mob or a committee. These groups are often less rational than the individuals making them up. Then there are groups of people who're making individual decisions and who are only seen as a group if you stand back and squint: like a market that might be analyzed by an economist. These tend to be more rational than the individuals.

There is a very fine line between rationality and rationalization.

People are mostly irrational, more so in groups. But that's not to say you can't predict group (or even individual!) behavior by rational means.