Predictably Irrational
April 18, 2008
I took some time off to take care of my health at the local hospital. I made a mistake of bringing my assistant Blackberry with me. Here I was, one hour after my surgery drugged up and happy, talking business on my “Crackberry”.
Why did I feel a need to take care of business when I had a perfect reason not to.
Why do we make foolish and irrational decisions?
Read “Pedictably Irrational” by Dan Ariely. You may get some answers.
You’re already thinking the author of Predictably Irrational is not talking about a smart, practical person like you. But he is.
MIT professor Dan Ariely has been studying behavioral economics for 20 years. He contends that irrational behavior is a part of human nature. Don’t be put off by his academic standing. His new book is an entertaining read.
It’s a fascinating romp through the science of decision-making. Ariely shows how emotions, social norms, relativity and expectations lead us astray.
He illustrates how people keep their options open, even when one is obviously better; why a woman can’t decide on one of two suitors though one has demonstrated that he is better.
Want to know why a penny difference in price can prompt you to choose a different candy than the one you really want? Why coffee in a nice setting tastes better? Why a person looks more attractive when a less-attractive person enters the room? Or why people who would never steal money take office supplies?
Ariely says our understanding of economics is now based on the assumption that people behave rationally. It should be based on the natural irrationality of human beings. But once understood, irrationality can be overcome.
Some of his experiments had surprising outcomes. In one, people were asked to write down the last two digits of their Social Security numbers. After they did, it was found that people with numbers ending in the highest digits (80-99) were willing to pay more for items like wine and chocolates than those with the lowest numbers, those ending in 01 to 20.
Economists are using the new-found knowledge to design fixes for problems ranging from drug addition, to undersaving for retirement, or to the positioning of cookies and fruits in the cafeteria.
Go and buy Predictably Irrational by Dan Ariely, HarperCollins, 304 pages, $25.95.
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