irrationality in economics

Irrationality in economics refers to decisions made by individuals or groups that deviate from what would be considered rational or optimal behavior, often due to emotions, biases, or incomplete information. For example, people might make poor financial choices by succumbing to fear, overconfidence, or herd mentality, rather than analyzing risks objectively. This can lead to market bubbles, sudden crashes, and inefficient resource allocation, highlighting that human behavior often contradicts traditional economic theories, which assume people always act logically to maximize their benefits. Understanding this helps economists better predict and manage economic outcomes.