Predictably Irrational: The Hidden Forces That Shape Our Decisions | Dan Ariely

Predictably Irrational: The Hidden Forces That Shape Our Decisions | Dan Ariely | People Are Predictably Interested In More Than Money

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Predictably Irrati...

	Predictably Irrational: The Hidden Forces That Shape Our Decisions Dan Ariely HarperCollins, 2008 - 304 pages average customer review:based on 85 reviews view larger image
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highly recommended

We are not so irrational. But, it is still a great book

This is a very entertaining book. Ariely's research is turning behavioral economics into a "hard" science or at least an empirical one. The minute he comes up with a new hypothesis he also comes up with a way to test it using his MIT students as a social science lab. Many of his experiments and other ones he studied are already classics in social sciences. The experiments where drugs that are expensive are more effective than cheaper ones (even though the actual drug was identical) and wines that are expensive taste better (even though the wine was the same) are already notorious. You probably read about them in Scientific American or Psychology Today.

Ariely starting point is with our dominant sense: vision. He shows how our eyes can be fooled. Depending on how an image is presented we see objects' size and colors differently from what they are. At his website, he shows many more intriguing visual traps. So, if our eyes can be fooled, can our abstract reasoning be tricked too? Do we make judgments assuming we are rational when we are not? Are those irrational behaviors predictable? That's what this book is all about.

Some of his examples are pretty intriguing. People bids for various objects were influenced by the last two digits of their social security number (that they were asked to recall before bidding). This is "price anchoring." His example of the Duke Basketball tickets is baffling. He becomes a middleman buying tickets from ticket owners to resell to others who did not get tickets. He found no takers as the average asking price from ticket sellers was an amazing $2,400 and the bid price from potential buyers was $175. That's a huge bid-ask spread that seems truly irrational. The zero effect is interesting too. We often make poor choices because something is thrown in for free. Ariely smartly connects the zero effect to our wired-in strong loss avoidance. If something is free, we can't possibly loose anything right? We think that way. Ariely uncovers situations where we make bad choices that way. Chapter 8 makes a good case for simplifying our lives and focus on the few things we love and are effective at. Instead, we encumber ourselves by maintaining choices open and reduce our productivity and happiness overall.

His writing on the placebo effect and expectations is excellent. One part I found shocking is when he states the couple of well established surgical operations (a form of bypass surgery and knee arthroscopic surgery) that were tested against placebo (fake surgeries). They showed no benefits. He pondered how many other surgeries would this also be the case for?

Another classic experiment he mentioned related to expectations was the math test taking of American Asian women. When they thought of themselves as Asian they did better than when they thought of themselves as women. So, expectations affect performance.

But some of Ariely's examples may not denote irrationality. When he indicates that when people move from an expensive real estate market to a cheaper one, they spend close to the same amount on their new home vs what they sold their old home for. By doing so, they buy more of a house than they need. The reverse is true too. When moving from a cheap real estate market to an expensive one, people buy much smaller homes and end up being cramped. He calls that irrational. But, people just buy what the sale proceeds of their old house allow. He also states that lawyers will turn down an offer to work for $30 to give legal assistance to the elderly. But, they'll accept to work for free (volunteer). For a lawyer, volunteering generates goodwill within his community. Meanwhile, working for cheap does not. I don't view that as irrational. When people order beer in the U.S. they order different brands to promote their individuality. Meanwhile, in Asia they tend to order the same brand to promote cooperation. But, is it irrational to follow cultural norms?

Even though I don't think we are quite as irrational as Ariely suggests, this is still a fascinating book. You can tell I really enjoyed it. If you found my review interesting you will like it too. I also strongly recommend Scott Plous's The Psychology of Judgment and Decision Making that covers the same topic.

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People Are Predictably Interested In More Than Money

Only a professor of behavioral economics would conclude that when people respond to motives other than money they are being predictably irrational. If you want to see some clever experiments that demonstrate that people are interested in things other than money, read this book.

I would like to observe, however, that such experiments have to be taken with a grain of salt when people know that they are experiments or reflect unexpected questions rather than serious looks at on-going behavior in areas where people have a lot of experience. For instance, the book looks at whether and at what price Duke students will sell basketball tickets they have just put a lot of effort into getting. Clearly, there are factors other than profit that motivated the buying in the first place. Most students probably wanted to get lucky and go to the game. Selling a ticket under these circumstances denies the opportunity to go to the game. A ticket broker would make a rational decision about whether to hire students to try get a ticket this way, but a student who does this a few times wouldn't. Study the ticket broker and you'll get more economic behavior. Study the student who wants to go the game and you won't. So why should we be surprised?

I remember being a subject of a lot of these experiments as a student. If the experiment struck me as particularly stupid, I would often feel rebellious and do things to act in noneconomic ways just to prove I was a person. I didn't see that effects like those are being studied here.

If you want to learn about human behavior, I suggest you study all of the motives . . . not just try to understand the economic motives.

In addition, some of the experiments probably depend in part on the common meaning of certain words being different than the definition that a professor would use. I think the experiments about certainty and probability wording may be tainted by that problem.

Professor Ariely is a clever fellow, but I think he stretches his conclusions further than they deserve. He's also interested in finding ways to make people look stupid rather than appreciating the genius that most people exhibit routinely. I couldn't help feeling that there was too much economic motive in his desire to write this book (a P.T. Barnum approach rather than trying to truly educate).

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Interesting topic but boring writing style

The topic of the book is one of the most intetesting issues, not to mention a Nobel prize that was awarded to Professor Daniel Kahanmann for his thesis of the psycho-economic perspective that shape human beings decision making. However, the book seems to be too long, not to say boring, after reading the first pages. Some advertising slogans analysis alongside with ilustrations could have turn this book into an interesting and enjoyable reading experience.

reviews: 1, 2, page 3, 4, 5, 6, 7, 8, 9, 10, 11, 12

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