Ryan's Reviews > Predictably Irrational: The Hidden Forces That Shape Our Decisions

Predictably Irrational by Dan Ariely
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's review
Mar 18, 2008

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bookshelves: business-economics, psychology, non-fiction, owned-books
Read in March, 2008

As a social psychologist, I have been trained to scoff at all "behavioral economists" because they often claim to have recently discovered that individuals do not always behave "rationally". Furthermore, they seem to brilliantly deduce that the only way to accurately predict how humans actually behave is to test behavior/decision making empirically. Of course, social psychologists have been doing this for over half a century without much public fanfare or guest spots on "MSNBC" or "CNN" every time people want to know how consumers make decisions.

With this clear bias of mine in mind, this isn't a bad book. Ariely at least gives full credit to Tversky and Kahneman's influence on his work (both psychologists), and he describes his experiments in clear, easy-to-understand language for the non-scientist reader. The big "however" with this book is Ariely's tendency to extrapolate beyond the results of his studies with recommendations concerning public policy and personal solutions for individuals. Not that his advice is necessarily wrong, but it should always be made clear where the data stop and the personal advice begins. I would recommend this book to my non-social psychologist friends.

My notes and quotes:

Ariely is a behavioral economist from Israel. Much of his work is closely related to Tversky and Kanneman’s work, although he has taken it in many new directions, but it is usually related to consumer behavior in some way.

*** He describes how money is often the most expensive way to motivate people. Instead, he suggests using social norms to do so. But he also warns the rules are different when you enter social norms into a relationship as opposed to market norms. The same rules that you use in relationships apply rather than the financial assessment of how much certain behaviors are worth. So if a business tries to develop social norms to increase productivity, they can’t all of a sudden introduce market norms without expecting a decrease in loyalty, etc.

*** He spends some time talking about the influence of arousal on decision making, or specifically how we believe we will make a particular decision when in cold, rational states than we end up making when we are highly aroused. His specific studies have examined sexual decision making and how people are more than twice as likely to rate their likelihood of engaging in various sexual behaviors as high when they are aroused vs. when they are not. This is highly relevant to things like abstinence training programs and even safe sex programs. The best prevention is to prevent the high level of arousal or the opportunity in the first place, but if arousal does occur to make sure people are trained to have what they need available “just in case”. The same principles apply for the faulty predictions of how we would behave under any emotional or motivational state, such as hunger. Another example is pregnant women not wanting to use pain medication during birth. They make the decision beforehand, but often change their mind once the pain begins because they cannot predict how they will feel during that state. One technique he offers to test this is to have a woman hold her hand into a bucket of ice for two minutes while practicing her breathing. If she is able to handle it without trouble she might be able to handle childbirth more reasonably.

*** His next section concerns procrastination and various methods of dealing with it. He divided his class into three sections, one where they got to pick their own deadlines, but once they were chosen they were firm; one where the deadlines were firmly established by the instructor; and one where there were no deadlines, they just had to submit their papers by the end of the quarter. The forced deadlines condition did best, the ones who chose their own deadlines did second, and the no deadlines condition performed the worst on the paper. He suggests the development of more external controls that we can select to prevent us from having to face temptation (to procrastinate, to spend, etc.) in the first place. By setting up our own deadlines/goals that are set in stone, we can head off our self regulation tendencies and just follow the designated structure.

*** His next section relates to when and why people cheat. He found that for many tasks where people are unsupervised, they fail to cheat as much as they possibly can, even when no one will find out, but they almost always cheat a little. This is because in small circumstances like that people don’t really consider what they are doing as wrong. In other words, small infractions don’t typically bring to mind codes of conduct we have available for moral decisions. Instead they just sweep the transgression under the rug without thinking about it. But if people were reminded of a moral code (like the 10 commandments) they wouldn’t cheat at all. The key is to make morality accessible so that the decision will be framed in moral terms. He also suggests oaths and guilds might make ethics in business more likely because people would frame their decisions more on the code of conduct of their organization/profession instead of not really thinking about it.

*** He continues on with his cheating work, but extends it to the difference between cash and non-cash currencies. When people are playing a game for cash they are much more likely to tell the truth about how much they earned (because the cash is a concrete reminder of how important the decision is) compared to when they play the game for tokens or credit of some kind. The problem is that people think there decisions are always made based on the same moral code regardless of the form of money they use. But in reality, the more concrete and meaningful a currency is, the more likely we are to frame our decisions in terms of market norms, and moral judgment. Some of the examples for non-monetary transactions are wardrobing or returning clothes after wearing them once; expense reports; taxes; insurance overestimations; or stealing anything that isn’t directly related to cash in general.

*** He ends his book with a website for his book (www.predictablyirrational.com), and mentions that you can sign up for one of his studies from the site.
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