Dan Ariely.
Predictably Irrational: the hidden forces that shape our decisions.
Harper. 2008
rating : 2.5 : great stuff
review : 17 October 2018
• Why does recalling the Ten Commandments reduce our tendency to lie, even when we couldn’t possibly be caught?
• Why do we splurge on an expensive meal but cut out vouchers to save twenty-five pence on a tin of soup?
When it comes to making decisions in our lives, we think we’re in control. We think we’re making smart, rational choices. But are we? From paying for coffee to losing weight, and buying a car to choosing a romantic partner, Ariely explains how to break through these systematic patterns of thought to make better, more financially sound, decisions. Predictably Irrational is not simply a fascinating read; it has the power to change the way we interact with the world one small decision at a time. In the current economic crisis it is an invaluable tool that no person should be without.
Classical economic theory is predicated on self-interested rational actors. But people aren’t rational. So much the worse for classical economics.
Although people aren’t rational, they aren’t randomly irrational, either. Instead, they are predictably irrational, in a way that can be studied and measured, and be built into a more realistic economic theory: behavioural economics.
Dan Ariely, psychologist and behavioural economist, engagingly describes a range of experiments he and his colleagues has performed (mostly on undergraduate students, in the time-honoured experimental psychology manner) to unpick a wide range patterns of irrationality. He looks at the over-strong lure of free items, how we overvalue our possessions, how keeping options open can be a mistake, why shops will often display an expensive option they don’t expect to sell, why we are happy to do things for free we wouldn’t do if paid for, how more expensive items are more effective than identical cheaper ones, how dishonesty varies when cash is involved, how some people choose second best, and more.
I found the chapter on free work versus paid work interesting, the difference being between social norms and market norms. The world is moving us towards the latter, seemingly to the detriment of enjoyment. Similarly the chapter on honesty highlights how people are more honest when cash is involved: while taking a pencil from work is barely noticed, taking the equivalent value in cash would be beyond the pale. Yet we are moving towards a cashless world, maybe to the detriment of honesty?
This is a good read, with the experiments clearly described, and the context and consequences well explained. I am not entirely convinced that the experimental situations, with their small values and low consequences, can be safely extrapolated to larger scale cases, but they are very illuminating. Several of the examples will be useful to help avoid faulty reasoning in certain cases. (Although I already order what I want from the menu, whether or not someone else in the party has previously ordered the same.)
