Final answer:
The theory that people act based on subjective rather than objective reality is Postmodernism, which suggests that realities are social constructs and relative. Pragmatism also supports the view that language and meaning are shaped by social agreement and that reality serves specific functions within a group.
Step-by-step explanation:
The theory that suggests that people's actions are not based on objective reality but are instead influenced by subjective reality is known as Postmodernism. Postmodernism challenges the notion of a single, objective truth and maintains that apparent realities are social constructs, subject to change and interpreted differently by each individual. This perspective focuses on the significance of language, power relations, and motivations in shaping ideas and beliefs. Moreover, it claims that what we perceive as reality is a social function and that knowledge and understanding are developed through constructivism, idealism, pluralism, relativism, and skepticism.
Another related theory is Pragmatism, which posits that the meaning and truth ascribed to language and reality are defined by the collective agreement within a group. According to Pragmatism, reality is a construct that serves specific functions, implying that multiple interpretations of reality can all be considered accurate within their respective contexts.
These theoretical frameworks argue against the existence of absolute or objective knowledge and suggest that human behavior is shaped by causal factors as well as the freedom of personal choice. They emphasize the importance of examining belief systems critically, even as they remain skeptical of finding objective criteria by which to do so.