Managerial Accounting Notes

Accounting chapter 7 managerial accounting Exercises Lambert Fabrication, Inc. , uses activity-based costing data for internal decisions. The company has the following four activity cost pools: Activity Cost PoolAnnual Activity Producing units5,000 machine-hours Processing orders1,000 orders Customer support200 customers OtherNot applicable The â€Å"Other† activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The company traces the costs of direct materials and direct labor to jobs (i. . , orders). Overhead costs—both manufacturing and non-manufacturing—are allocated to jobs using the activity-based costing system. These overhead costs are listed below: Indirect factory wages$100,000 Other manufacturing overheadS200,000 Selling and administrative expense$400,000 To develop the company's activity-based costing system, employees were asked how they distributed their time and resources across the four activity cost pools. The results of those interviews appear below: Results of Interviews of EmployeesDistribution of Resource Consumption Across Activities Producing Processing Customer UnitsOrdersSupportOtherTotals Indirect factory wages40%30%10%20%100% Other manufacturing overhead30%10%0%60%100% Selling and administrative expense0%25%40%35%100% a. Using the results of the interviews, carry out the first-stage allocation of costs to the activity cost pools. Producing Processing Customer UnitsOrdersSupportOtherTotals Indirect factory wages $ S S $ SOther manufacturing overhead Selling and administrative expense.. Total overhead cost $$ $___ ___ $ $__ ____ Chapter 7 b. Using the results of the first-stage allocation, compute the activity rates for each of the activity cost pools. (Activity rates are not computed for the â€Å"Other† activity cost pool because these costs will not be allocated to products or customers. ) Computation of Activity RatesActivity Cost Pools Total CostTotal ActivityActivity Rate Producing units $ machine-hours $ per machine-hour Processing orders $ orders $ per order Customer support $ customers $per customer c. Data concerning one of the company's products are listed below: Product W562 Selling price$100 Annual sales (units)1,000 Direct materials per unit$24 Direct labor per unit$6 Machine-hours per unit1. 5 Orders processed80 Using the activity rates you derived in part (b) above and the above data, compute the total amount of over ¬head cost that would be allocated to product W562.Overhead Cost of Product W562 Activity Cost PoolsActivity RateActivityABC Cost Producing units$per machine-hourmachine-hours$ Processing orders$per orderorders Customer support$per customerNot applicable Total $__________ d. Using the data developed above for product W562, complete the following report. Product Margin—Product W562 Sales$ Costs: Direct materials$ Direct labor Producing units Processing orders ________ Product margin $_______________

Duc de Saint-Simon and The Court of Louis XIV essays

Duc de Saint-Simon and The Court of Louis XIV essays In 1746 Duc de Saint Simon finished work on his Memoirs. In this document he gave a detailed account of life in Versailles under the king Louis XIV. Saint-Simon described Louis XIV as a man whose natural talents were below mediocrity. He claimed that Louis made up for his natural shortcomings by affiliating himself with the most proficient people of both sexes in all areas. According to Saint-Simon Louis XIV real talent was that he was able to assimilate what was best in the minds of others without slavish imitation. In Saint-Simons document he states that Louis XIV greatest weakness was his vanity. This love of being flattered often caused Louis to engage in serious wars; for he was easily convinced that he had a superior aptitude when it came to war than any of his Generals (Saint-Simon). He also loved to tell stories about his campaigns which he expressed ... clearly in well chosen language (Saint-Simon). One example of his vanity is the symbol he chose to represent himsel f. Louis XIV dub himself the Sun King, claiming that the sun represented the duties of a Prince (Sendlessly promoted life, joy and growth and that the sun was the most dazzling and most beautiful image of the monarch (S It was not until 1682 that Louis XIV officially moved his court from Paris to Versailles. The motives behind him moving his court were mainly due to security issues. Louis did not feel safe in Paris due to a series of revolts against the monarchy known as the Fronde, also being away from the large crowds in Paris allowed him to keep a more watchful eye on the member of his court. By removing himself from the city he could more easily detect the movements and temporary absences of any of ... members (Saint-Simon). According to S&S Louis striped the member of his c...

Business analysis Essay Example | Topics and Well Written Essays - 2750 words

Business analysis - Essay Example So any negative traits or behaviour associated with them is hided because of the fear of norms of the society. It is difficult to surpass these distortions. They are found to have a profound effect on the job which is already considered tough in terms of measuring the perception, experience and memory. The worst effect of cognitive bias can result in spoiling or limiting an otherwise solid research design. In conducting qualitative research, it is crucial to be aware of the biases which occur due to cognition. These can be emerging from effects of experiments as well from participants or respondents. Even though these biases are difficult in terms of complete elimination, a combination of these techniques can help in reducing the distortions caused by cognitive bias. A major example of cognitive bias occurs during qualitative research, where the measurement techniques such as questionnaire, focus group interviews are flowed, because of cognitive biases. This is because the objective of asking questions to the comsumers is rooted to their opinions and thoughts. According to Zambardino & Goodfellow (2007), evaluation of advertising and branding is fundamentally rooted fundamentally in questioning individuals regarding their recollections and attitudes. However, the advertising does not operate according to these methods. Advertisements employ a cognitive discourse in order to uncover emotional phenomena during advertisements and thus introduce a cognitive bias into the measurement process. There are various kinds of cognitive biases, which not only affect the consumer but also the researcher. Groupthink, also known as herd behaviour or the bandwagon effect is a behaviour which occurs when members in a group conceal or minimize their personal opinions or beliefs to maintain cohesiveness in the group. In case of group setting, participants may consider they are left out or uncomfortable if the personal viewpoint expressed by them is not accepted (Asch, 1955). The p articipants tend to move along and agree with what the group is concluding, even if they have a different opinion or their viewpoint does not match with the majority. This is a common problem when information is gathered in collective techniques such as focus group and this is a major cognitive bias which results in skewed results. Another form of cognitive bias which influences research is the availability bias. When respondents are asked questions, it is most likely that they recall their more recent experiences or recall only those experiences that come to their mind readily. The problem with this is that much of a participant’s recall is based in cognitive processes that focus on memorable or vivid occurrences. This results in a biased result because the absolute information is not obtained from the respondent. Cognitive biases not only influence the beliefs and opinions of the consumer, but also have the potential to negatively impact the researcher. Confirmation bias ca n be considered as a common form of bias occurring from the viewpoint of the researcher. It is the perception where a researcher opts for information that matches the conceptions already present in the mind and rejects all other new information, so as to avoid any conflict in beliefs and attitudes. Researchers tend

Precautions to be taken in drafting Oil & Gas Industry Contracts Essay

Precautions to be taken in drafting Oil & Gas Industry Contracts - Essay Example This essay discusses that Oil & Gas industry is a unique industry as it involves a high risk aspect of exploitation and exploration, high capital –intensive character of the industry, geographic ambit of operations and assets, environmental issues, up-date technology needs, safeguard issues, downstream brand advertising, size and range of employee base, political predispositions,etc. Oil & Gas industry engrosses the granting many contracts like project feasibility study, construction, supplies, civil and offshore contracts, mainly through subcontracts. If the turnkey contract is implemented, then the contract has the responsibility of defining in a strict, complete and definite manner the works to be covered and risk to be borne in the contract itself. In the oil and gas sector, the definitive goal of any operator is to exploit maximum revenues by efficient and rapid discovery of petroleum and gas resources with no or minimal disruption. Contractual process in Oil and Gas (O&G ) industry is a lengthy and time-consuming process , fixing the accountability and granting damages to the affected parties is normally considered to be a hectic task given the nature of the industry which is symbolised by subcontracting. To achieve their business goal, operators in O&G industry is well aware that risks in the industry can be administered and controlled when the same has been unequivocally distributed to one or more parties. It is to be noted that risks can be covered by taking appropriate insurance policies, but this involves an additional financial burden to the operators. The easy way to shift the risk in O&G industry is to employ contractors to alter common law approach as a risk management process. (4). LOGIC of UK has published a standard contract (boilerplate contract) through its 2nd Edition, October 2004 for the oil & gas industry in UK. This is a standard contract, and the contract employs English law .However, now, all references to UK needs’ have been withdrawn, and it can be employed on a global basis. For drafting contracts for oil and gas industry , the lawyers will use boilerplate contract like the one designed by Logic .It connotes to any interchangeable ,† one size fits all† provision. While drafting the contract, more significance has to be given to the areas like the notice clauses, the choice of law clauses, the force majeure clauses, the delegation and the assignment provision. These clauses are significant as it will give a road map, informing the parties concerned their relationships and how to administer the contract. (2) Some of the main advantages of the boilerplate contracts are that it contains many clauses either override or restates the common law provisions and is being in use by the relevant companies for long time. It is having drafting efficiency and to costs fewer pounds and takes less time to input the standard clauses into the contract. By incorporating the conditions available in the bo ilerplate contracts will help to avoid errors. Further, a standard clause is well known to business and legal community, thereby minimising the costs of reassessing and negotiating the provisions, as well as fostering a analogues interpretation. (2) Some critics allege that the poorly outlined boilerplate clauses may result in issues instead of finding a solution while execution of a contract. A poorly drafted contract will no doubt will result in the litigation which is not only time-consuming and also expensive. Thus, there is a need to give more careful attention to each and every boilerplate clauses, including how it is going to be interpreted in the case of future litigation. (2) For the risk allocation, common law provision is followed in O&G contracts and, where there is no specific contract and the general law pertaining to tort, contract/delict will be applicable. With the operative word being ‘negligence†, the liability stems from the fault or infringement of d uty in such cases.

FINANCIAL STATEMENTS AND RATIOS ANALYSIS Assignment

FINANCIAL STATEMENTS AND RATIOS ANALYSIS - Assignment Example The two main financial statements (the Income Statement and Balance Sheet) are going to be analyzed in both cases together with some financial ratios. However, before embarking on the aforementioned task, each of these banking corporations is going to be considered individually in a bid to understand their backgrounds. This is going to be in the order in which they have been mentioned in the introduction part. Flagstar Bank is a banking institution known by the official name Flagstar Bank and Flagstar Bancorp Investment Company acts as its holding company. It is headquartered at Troy, Michigan at the address 5151 Corporate Drive. Its website address is www.flagstar.com and its investor relations phone number is (248) 312-2000 and in case an investor wants to send an e-mail there is a facility on the company’s website to do that(investors@flagstar.com) plus an in case of any suspicion in dealings with Flagstar e-mail abuse@flagstar.com. The stock exchange trading symbol for this company is FBC at NYSE. The current share price is $0.79 and the company’s stock is under Financial Industries and further narrows down to the bank sector of NYSE. According to the 2009’s annual report, there are ten directors of which eight are outside directors and two are inside directors. Outside directors are considered independent when it comes to the company’s management decision making and therefore, mindful of the impact of the decisions’ impact on the shareholders. This is a branch bank and it operates around 175 banking centers. (flagstar.com, 2011) Universal banking refers to a case where banking firms have a network of branches, several firm claims, offers a variety of services as well as taking part in corporate governance upon firms which depend on banks for sourcing funds. Flagstar bank is not a universal bank according to the opinion of the study. (Calomiris, 1995 p1) On the other hand, the

Naming and Shaming Sex Offenders Essay Example for Free

Naming and Shaming Sex Offenders Essay Define: The social issue naming and shaming sex offenders is the worst sex offenders being named and shamed on a website with their picture, name, address and date of birth on their profile. People can type in the suburb they live in and see what sex offenders live in their area. Argument #1 For: Sex offenders, even more so than other forms of crime, are prone to re-offending upon release from prison. Therefore, to protect society, they should be required to register with a local police station, and their names and addresses should be made available to the public. Police would also supply this information to schools and day cares, who will be consequently far more alert to any risk. Parents would find this information invaluable in ensuring their children’s safety, and it would cut the rate of sexual crime by those freed from prison. In the end, we have to protect our children at any cost. Against: This proposal is an essential violation of the principles of our penal system, which are based on the serving of a set punishment before being freed from prison. This registration inflicts a new punishment for an old crime and will lead to sex offenders to be demonized by their neighbours and community, and possibly be forced to move out of the town they are located in. It will also lead to campaigns and violence, sometimes against innocent people with similar looks and names, such a risk cannot be taken. Argument #2 For: Crimes for sexual offence are among the most repulsive and damaging that exist; they can ruin a person’s life. As the offenders responsible for these crimes cannot be imprisoned forever, and must be released at some point extra caution must be taken to ensure they pose no threat to the public. Against: The suggestions of this website are clouding the options. Physiological evaluations can define accurately whether an offender is still danger to society or not. If an offender is still a danger to society then they should not be released from prison, if they are not a danger any more then they should be released and be able to live a happy and normal life. Studies have shown that treatment is quite effective to help reduce the rate of re-offending. Argument #3 For: A national web register would allow police to track re-offenders faster, increasing the success rate and the speed of which they are brought to justice. Against: Police can be aided by a register only available to the police. Making it public might make the offenders run and making it hard for police to track them. Studies have shown that a public register is a subjective to abuse from the public. Around 2 out of every 5 offenders have been a victim of vigilantism. The social ostracism, denial of rehabilitative measure such as housing and stable employment, and threats of vigilantism, making former offenders disobey reporting requirements. Argument #4 For: A national register would benefit sexual offenders directly, as they would be on local registers of counseling and psychological help groups, who would be more able to offer help. Against: Offenders should have access to these services anyway, regardless of whether their names are available to society or not. This register has led to large qualities of withdrawing sex offenders listen on the register, along with their families. The register is a spread of myths and stereotypes used by the public to justify the ostracism and denial of service. Sex offenders in Australia have lost jobs, housing and treatment options and forced to live under never ending changing requirements.

The Philosophy of Rationality in Economics

The Philosophy of Rationality in Economics Nikita Kohli The ways of being human are bound but infinite. -Larry Niven An Introduction There exists no single definition of Rationality, yet it forms the cornerstone of basal assumptions of standard models of economics. A sweeping glance of the concept however, elucidates one fact. Rationality deals in human behaviour, it aims to understand its motivations and predict future outcomes based on choices. Rife with contradictions and limitations analogous to the innate complexity of human nature, this theory has been repeated altered and manifests itself in different ways with the progression of time. Objectives: The primary objective of this paper is to qualitatively analyze economic literature and draw conclusions pertaining to the concept of rationality and its relevance in the world today. Literature Review This paper, as the title suggests, aims to examine the concept of rationality, its use both philosophically in the study of broad humanity as well as in its more specific application to economics and standard models of human behaviour. In order to gain an understanding of early texts exploring concepts of rationality, such as the works of Aristotle and, the author relied on interpretative papers such as those of Fred Miller (1984). Various original works of authors have been studied chronologically to enable a historic overview of the concept, eventually yielding to contemporary work, implications and applications to various phenomena. Notable repositories of information such as the Palgrave Dictionary of Economics and critical essays on the subject of Rationality (a collection edited by Bill Gerrard) have been accessed. The papers with their extensive reference lists gave the author insight into the vast literature focused on this specific subject. Reviews and critiques, and studies in retrospect of concepts have been perused to help put an idea from another time into contemporary perspective. PART 1 Rationality: A historical Analysis If one devalues rationality, the world tends to fall apart – Lars Von Trier The first mention of the concept of Rationality is seen in the work of Aristotle; who states that the human being has a rational principle and the ability to carry out rationally formulated projects. (Miller, 1984). ‘Homo Economicus’ or the ‘Economic Man’ was a term that first appeared in the work of J.S Mill who described man as ‘solely as a being who desires to possess wealth, and who is capable of judging the comparative efficacy of means for obtaining that end’. (Mill, 1844). This is the base of the most widespread assumption in economics – that man strives to only maximize his utility and satisfaction, and this trait, intrinsic to all men, is termed ‘rationality’. Jevons, the forbearer of mathematical economics propounded a quantitative measure of the utility function. In stressing on the concept of marginal utility, he put forth some basic tenets of the utility consumption theory, namely that economic agents derive utility by consumption of goods, and that they are rational, calculating maximisers. In attempting to ‘treat the economy as a  calculus  of pleasure and pain’, Jevons (1871) set the foundations for a paradigm of Economics, which was deeply rooted in individualistic theories of motivation and decisions. Von Mises (1949), in his seminal work on human nature and decision making, asserted that human action is ‘necessarily always rational’. His understanding of rationality, however, differed from that of his successors in the field of Economics. He believed that every human being acted in a way that furthered their self-interest and was to achieve some end goal. When viewed in pure subjectivity, no action can be termed irrational as every human being acts out of some motivation, thus making the action ‘rational’. Concepts of Rationality: A contemporary analysis All human behavior is scheduled and programmed through rationality.   Michael Foucault In the early 1960s, mathematical economist John Muth (considered the Father of the Rational Expectations Revolution in Economics) put forth a body of work that would leave on indelible mark on the rationality discourse. For the first time, a significant difference in economic analysis was made, that between ‘adaptive’ and ‘rational’ expectations. Muth’s work and the theory of Rational Expectations was considered iconoclastic at the time as it proposed a shift in knowledge processing, analysis and decision making. Neo-classical economics, as propounded by Friedman, Keynes and others dealt with systems and analysis using historical data. This was termed ‘adaptive’. Adaptive neo-classical theory forms the basis for many policy decisions, be in pump-priming investment or monetary contraction. Policy is created in keeping with past results and some common assumptions in economics – people will demand more when the government invests in the economy etc. In contrast, Rational Expectations take into view the whole economy, in its real-time functionality, and uses imbibes current information in its analysis. It propounds that ‘rational agents’ continuously update their information and take into account the whole system. As Muth (1961) asserts, ‘the economy does not waste information, and that expectations depend specifically on the structure of the entire system. In addition to this fundamental tenet, this school of thought also states that markets will always clear; prices will adjust to fluctuations in supply almost immediately. When this concept is extrapolated to encompass the macro economy, it is often stated that no government policy or exogenous shock can shake up the system. This is because of the existence of rational agents, who, using their knowledge of existing phenomenon, expect certain outcomes and adjust their course of action accordingly. For instance, in a recessionary period, sellers will not let their prices fall. They behave in this manner because they are aware of the current scenario and preempt government investment intervention to attenuate falling demand. Thus they expect their demand to rise in the near future. As Greg Egan would put it, ‘It all adds up to normality’. While implicit in the Rational Expectations theory is the existence of perfect knowledge, transmuting into rational decisions, there emerged a field of study which emphasized the shortcomings of knowledge and information acquisition. The term ‘Bounded Rationality’ was introduced by Herbert Simon in his book Models of Man (1957). While in spirit adhering to the belief that human beings are rational, Simon’s theory observed a critical failing; that of the assumption of complete information. In this structure, human behaviour is viewed not in terms of rational, utility maximizing behaviour. Instead, it is seen as a series of actions, often not compatible with each other, decisions taken in situations of partial information and based on limited reflection. This accounts for the limitations to both knowledge and cognitive capacity. Taking this idea further, simmering in the field of human behaviour vis a vis economic processes, is the belief that human beings can sometimes be ‘Irrational’. Carrying out specific studies in this area, economist Dan Ariely finds surprising results. In a given situation, a person may make a choice which will not benefit them in the future, may not help them immediately, and the decision is made in the light of these two eventualities. Ariely explains that this is because human behaviour is not always controlled by rational motives, it is highly impulse driven and impacted heavily by exogenous factors. In the early 1960s, Gary Becker put forth the same idea; only that he believed even irrational agents can work ‘smoothly as a single unit’. Human irrationality, he states, was in fact rational. PART 2 – NUANCES OF RATIONALITY Amartya Sen anchors a clear distinction in the approaches to Rationality in literature. He divides them into two broad categories – Instrumental Rationality and Substantive Rationality. Substantive rationality is when one acts out of objectively, independently defined self interest. This lends itself to the General Equilibrium theory, the starting point of individual behaviour is a predefined utility function, and choice arises from this within the constraints imposed. Instrumental rationality dons a more humane approach wherein it allows for objectives that are not restricted to solely self-interest. This methodology acknowledges the influence of other factors on rationality. Sociologist Max Weber states a similar idea; that of Wertrationalor value/belief-oriented rationality, wherein the motives for action are often driven by reasons intrinsic to a particular actor, such as specific emotions, societal or spiritual aspects. Daniel Kahneman and Amos Tversky have made important contributions to the understanding of rationality and reactions to choice. The Prospect theory attempts to describe decisions under uncertainty. It empirically proves that a decision making process is often not rational; people are risk-averse when they stand to incur losses and risk-taking when they stand to gain. Another obstacle to ‘rational’ thinking is the problems posed by ‘heuristics’ (Kahneman Tversky, 1974). Heuristics are mental short-cuts, which usually involve focusing on one part of a complex problem and often ignoring the larger, more complete set of information. This limited perception of the issue at hand is used to make a decision. In any sphere of study, the influence of external social factors cannot be denied, on a superficial level, this impact could manifest itself in the way of the ‘Demonstration’ or ‘Bandwagon’ effect. On deeper examination, we see that these exogenous factors often define an individual’s sense of Rationality, which leads us to realize that Rationality can never be completely objective or homogenously innate to all. Adopting a pragmatic approach to the limitations posed by imperfect knowledge, Herbert Simon proposes the term ‘satisficing’. He pointed out that human beings lack the cognitive resources tooptimize: the relevant probabilities of outcomes are usually, thus the evaluation of all outcomes with sufficient precision is rare, if not impossible. A more realistic approach to rationality takes into account these limitations. An important application of the rationality principle in neo-classical economic theory is in the analyses of perfect competition. Competitive equilibrium is said to have been reached when each person maximizes their utility, given a certain set of assumptions (no externalities). This state of equilibrium will tend towards Pareto Optimality as it is assumed that the Pareto Optimal state is one where there is perfectly competitive equilibrium at a given set of prices and some initial distribution of resources. Every rational utility maximizer is in equilibrium, wherein no one can be made better off without hurting another’s well-being and current status. This basal assumption of rational behaviour establishes the relationship between the aforementioned concepts. PART 3: CONCLUSION In everything, one thing is impossible: rationality – Nietshchze This paper has attempted to shed light upon the various dimensions of rationality, as depicted in economic phenomenon. Problems arise however, with the implicit assumption of rationality in models involving human behaviour in varied situations. Rationality implies comprehensive knowledge of the current economic system, which is then factored into the decision making process. In keeping with the ‘Efficient Market Hypothesis’, markets will always correct themselves and clear as people are able to adapt and adjust to fluctuations almost immediately, due to their information. It has also been argued that natural processes of elimination ensure that rationality perpetuates itself, where those who act ‘rationally’ work optimally. This can be seen in nature, in the principle of ‘survival of the fittest’. Milton Friedman also draws this parallel to markets, where non-profit maximizing firms are driven to a wall so that only the ‘rational’, profit maximizing firms may survive. (Friedman, 1953). These applications and assumptions are rife with shortfalls. The first limitation is that of ‘knowledge’. Acquisition of this perfect knowledge to facilitate rationality is expensive, consumes resources, and in many cases proves impossible to obtain. To assume that perfect knowledge is a prerequisite for rational behaviour limits its scope. While looking at markets and macro-structures, one can see rational expectations as the underlying force in stock markets. These markets are extremely sensitive to minor fluctuations and react almost instantaneously to restore equilibrium. The same cannot be said of the economy. It is impossible to expect policy to change, or its impact to be as versatile as is seen in the stock markets. The case of the rupee depreciation illustrates this point, wherein the stock markets adjust to the disturbance, but the economy is left flagging. Chamberlin points out, that for Perfectly Competitive equilibrium to exist, there at first must exist a certain measure of disequilibrium. He states that not merely pure, but perfect competition is requisite for the rationality hypotheses can have their full power. The existence of the initial disequilibrium, in conditions of complete rationality, proves to be contradictory. Another limitation of the rationality assumption is that it makes for models that are normative, rather positive. Formally and explicitly, these provide frameworks to understand how agents should act in order to maximize their self interest. This fails in its predictive capacity, to see how one will behave in the future. We’re all mad here – Cheshire Cat, Alice in Wonderland Rationality is assumed to be highly centered on the individual. But as Kenneth Arrow 1986) points out, rationality gathers not only its force, but very meaning from the social context in which it is embedded. It holds only under ideal conditions, the nature of which is not seen in the world today. Adam Smith in the Theory of Moral Sentiments attributes actions to not only self-interest, but more humane factors like love, benevolence and community feeling. A science taking into account human behaviour must closely study its major drivers. Exposure to various social factors and upbringing influences the way people think. Defining rationality becomes problematic, what is rational to one may be deemed irrational to another. For instance, faith, religious belief, personal opinions and ideology are not universal in their impact and acceptance. Rationality then becomes extremely contextual; one person’s rationality is bound to not hold in another person’s situation. Rationality can also be temporal, due to the lack of accurate information about the future; what holds true today or in the immediate foreseeable future, may not hold in the long-run. The limits and bounds to rational thinking are not clear and universal, they’re morphed and moulded and coloured by personal experiences and biases. A crucial distinction needs to be made about what kind of behaviour is rational and what is not, and what models of behaviour may be useful in predicting actual behaviour. Taking into account various individualities poses a great challenge, but to attribute motivation and action to perfect rationality, especially in the context of subjective human behaviour, is problematic. Anomalies will be patent to the process of fitting human nature and motives into an objective framework. The author concludes that an assumption about human beings, especially one as pervasive as assumed rationality, is dangerous. At the same time, accounting for individual drivers is nearly impossible. Policy, and core economic theory must be able to account for, at the very least acknowledge, these discrepancies. This is the only way to create frameworks which may work with greater precision. REFERENCES Arrow, K. J. (1986). Rationality of self and others in an economic system.  Journal of Business, S385-S399. Friedman, M. (1953). The methodology of positive economics.  The Philosophy of economics: an anthology,2, 180-213. Heap, H.S (1993) Post Modernity and New Conceptions of Rationality in Economics. In The Economics of Rationality. (pp. 48-60). Routledge Jevons, W. S. (1871).  The Theory of Political Economy. Macmillan and Company. Kahneman, D. (1994). New challenges to the rationality assumption.  Journal of Institutional and Theoretical Economics (JITE)/Zeitschrift fà ¼r die gesamte Staatswissenschaft, 18-36. Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics.  The American economic review,  93(5), 1449-1475. List, J. A. (2004). Neoclassical theory versus prospect theory: Evidence from the marketplace.  Econometrica,  72(2), 615-625. Mill, J. S., Backhouse, R. E. (1997).  On the Definition of Political Economy; and of the Method of Investigation Proper to it: Essays on Some Unsettled Questions of Political Economy (1844); On the Logic of the Moral Sciences: A System of Logic (1856)(Vol. 1). Routledge. Miller, F. D. (1984). Aristotle on Rationality in Action. The Review of Metaphysics, 499-520.s Muth, J. F. (1961). Rational expectations and the theory of price movements.Econometrica: Journal of the Econometric Society, 315-335. Sen, A. (2000). Reason before identity.  Romanes Lecture. Sen, A. K. (1977). Rational fools: A critique of the behavioral foundations of economic theory.  Philosophy Public Affairs,  6(4), 317-344. Stewart, S. A. (2005). Can behavioral economics save us from ourselves?.  University of Chicago magazine, 97(3). Swidler, A. (1973). The concept of rationality in the work of Max Weber.  Sociological Inquiry, 43(1), 35-42. Tetlock, P. E., Mellers, B. A. (2002). The great rationality debate.  Psychological Science, 13(1), 94-99. Tversky, A., Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases.  science,  185(4157), 1124-1131. Tversky, A., Kahneman, D. (1986). Rational choice and the framing of decisions. Journal of business, S251-S278. Von Mises, L., Greaves, B. B. (1949). Human action (pp. 59-62). Liberty Fund. Webliography Future Prospects. (2013, Aug, 5). retrieved September 1 2013, from The Economist Web Site: http://www.economist.com/blogs/freeexchange/2013/08/prospect-theory-and-economics Rethinking Thinking. (1999, Dec, 16). retrieved September 1 2013, from The Economist Web Site: http://www.economist.com/node/268946