Tuesday, July 2, 2013

Theories of Decision-Making



The decision-making involves the choice of a particular course of action from among a number of competing alternatives. Theories of decision-making are concerned with the question as to how such a choice is made. In this section we will consider the two main theories namely, the Rational Theory and the Incremental Theory. We will leave the treatment of the third theory, viz. Behavioural Theory developed by Herbert Simon to the next article.


The Rational Theory


According to this theory the decision-making first isolates the problem for decision and then identifies various alternative solutions. The costs and benefits of all the alternatives are then worked out and compared with each other. The best alternative is chosen according to the decision criteria decided in advance. On the face of it, this appears a very simple model assuming the decision-maker to be a rational person as it assumed in the study of Economics. The theory has, however, been subjected to severe criticism on account of the tacit assumption it makes.

Criticism




  1. The theory assumes that the problems are all known to the decision-maker. But, it is not a fact. The problems for decision require a great deal of investigation to isolate. The apparent problem may not be the real problem. The point may be easily understood by a simple example which is not from the field of administration. If a person is having high temperature it may not be cured merely by drugs meant for bringing down temperature. The cause may be hepatitis, urinary infection, bacterial infection or even tuberculosis. The right remedy can be found only after finding the real cause and this may require detailed investigations.



 

  • Another facile assumption of the theory, on the pattern of rationalist economic theory, is that all the alternative solutions of the problem chosen are known to decision-maker. It is further assumed that all the consequences of the alternative solutions are also known to the decision-maker and that he can instantly compare their costs and benefits. Anyone familiar with administrative situations knows that this is not true. Alternative solutions and their consequences have to be estimated. There are many limitations on this process e. g. time available for making a decision; the costs of gathering information, availability of relevant information etc.


 

 

  • Even if all the alternatives and their costs and benefits are known, it may not be possible for the decision-maker to reach a conclusion on account of the conflicting values that may be applicable to the situation, for example, if a new steel plant has to be established, should not be established on economic consideration in the vicinity of places where raw materials are available? Or should it be established in a backward area so that more jobs may become available to the deprived section of the people inspite of the increased costs? There may thus be a conflict of values which may make the task of decision maker very difficult.


 

 

  • Certain alternatives may not even be available to the decision-maker in view of the decisions already taken and executed. For example, system of educational administration cannot be easily altered radically in view of the costs already incurred.


 

 




The Incremental Theory


The above mentioned criticisms of the rational theory are to some extent answered by the Incremental Theory. According to incrementalist approach the various processes of decision-making like the selection of the problem and analysis of various alternatives etc. are not very clearly demarcated. The decision-maker considers only a few alternatives for dealing with the problems. These differ only marginally (or incrementally] from the existing policies. The change takes place slowly. The problem gets redefined and another incremental decisions is taken. It is a continuous process in which decision is generally by consensus. For that reason it is easy to implement.


Critical Evaluation


Obviously incremental decision-making cannot result in big changes. The process is essentially very slow, hut has several advantages over the rational decision-making process. Firstly, the process avoids violent changes which may at times give rise to social and political instability. The method is ideal in pluralist societies like American and India where it is difficult to find radical (through rational) solutions acceptable to all. Secondly, the incremental decision-making process reduced the risks and costs of decisions which have often to be taken under conditions of uncertainty. Thirdly the problems of data collection, analysis of alternatives etc. remain within manageable limits so that impossible burdens are not placed on the decision-makers. Very often the existing situation itself suggests a simple remedy of without much analysis. In short in place of a very rational decision which may not be easily found out, the incrementalism provides for a practical solution which may be modest but may at least work and work expeditiously.

The decision-makers, therefore, utilize both the methods depending upon the circumstances of the decision or even parts of a decision may be tackled by different methods.


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