Business executives do not seem to heed the lessons of decision research, and continue to make strategic decisions without considering common errors. Below, Phil Rosenzweig argues that the problem is not that executives do not wish to make better decisions, but rather that decision research has done an inadequate job of describing the realities of the decisions they face.
From the days of Adam Smith, economic theory has rested on the shoulders of homo economicus – the rational actor who makes choices consistent with utility maximisation. Whether these decisions involve what we buy, how we strike a balance between labor and leisure, or determine how much to spend and save, they were assumed to reflect clear-minded judgments based on enlightened self-interest. The free market economy, as the aggregation of many such rational choices, should be left to operate with minimal interference according to principles of laissez faire. Why, after all, should the government intervene when the invisible hand worked so well efficiently for the benefit of all?