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Abstract

The business of economics has always been the study of the dynamics of human behavior. It deals with how individuals, businesses or any group of people craft decisions concerning use of scarce resources in the hope of maximizing happiness. Economics is preoccupied with the study of decision-making under pressure of limited wherewithal, for which purpose it puts faith in rationality. However, postulating rationality for all times is a tall demand and somewhat naïve like in "animal spirits" and "irrational exuberance." Also what exactly is rational or for the greater good, is not always crystal clear. This paper surveys the Economics-Psychology interface area and has a new take on whether in emerging markets the models of rational behavior have the same features as anywhere else, and if peoples’ predilections and behaviors are universally the same, or whether they play out differently because of diverse social and cultural milieu. There is some rationale supporting the latter. Taken all together they seem to provide a different set of nuanced behavior that could help in making Herbert Simon’s bounded rationality more meaningful. Such an endeavor would also help avoid identification as "rational fools" of Amartya Sen. In view of this, economics texts need to be rewritten keeping in mind a) unacceptability of the basic assumption of unremitting rationality underlying economics and b) the influence of regional cultural differences. Not doing anything may not be an option for the future of the discipline.

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