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When I learned economics, we didn't study human beings. We studied some sort of human-looking economics calculator instead.

In my economics textbooks, no one ever bought a sports car because they just turned forty. All decisions were made on precisely calculated economic self-interest. Human beings with their emotional drives and needs had no place in economics back then.

One of the good things that's happened in my lifetime in business has been the rise of behavioral economics. Their message is that human beings act, well, human.

This should not have been news. Salespeople and effective marketers have known forever that we make most buying decisions emotionally. Then, sometimes, we justify them rationally. For a view from that perspective, check out Robert Cialdini's classic work, Influence: The Psychology of Persuasion.

Cialdini's book is a delight to read. So are many of the books by behavioral economists. Freakonomics, Predictably Irrational, and Nudge are three good examples. Starting from any of them, Amazon will serve up other interesting books.

In real life, human beings don't make rational decisions based on perfect information. Instead, we inject our human factors into the process and, almost always, decide based on imperfect information.

The great philosopher Anonymous has said: "We must take humans as they are because we cannot have them as we wish."

Additional Resources

The authors of the books I've linked to above are all very good writers. You may enjoy their blogs.

Robert Cialdini's Blog
Freakonomics Blog
Predictably Irrational Blog
Nudge Blog

Here are three other recent posts on decision making.

Why good managers make bad decisions
Erin White interviewed Dartmouth professor Sydney Finkelstein in the Wall Street Journal about his research on decision making. I thought the questions were good and the answers lacked depth.

One of these things is not just like the other
When it's decision time, it's tempting to use previous experience or a historical analogy as a guide. But that's dangerous unless you do some rigorous comparisons.

Tips for Better Decision Making
Decision making will always be a human and error-strewn process. But over the years I've found some things that will increase the likelihood of good decisions.

Wally's Working Supervisor's Support Kit is a collection of information and tools to help working supervisors do a better job. It's based on what Wally's learned in over twenty years of supervisory skills training. Click here to check it out.