Predictably Irrational: The Hidden Forces That Shape Our Decisions

by Dan Ariely

Once you see how systematic certain mistakes are—how we repeat them again and again—I think you will begin to learn how to avoid some of them.

humans rarely choose things in absolute terms. We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly.

most people don’t know what they want unless they see it in context. We don’t know what kind of racing bike we want—until we see a champ in the Tour de France ratcheting the gears on a particular model. We don’t know what kind of speaker system we like—until we hear a set of speakers that sounds better than the previous one.

MONEY, AS IT turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well.

The point is that while gifts are financially inefficient, they are an important social lubricant. They help us make friends and create long-term relationships that can sustain us through the ups and downs of life. Sometimes, it turns out, a waste of money can be worth a lot.

When we explored the interactions between social and market norms, we basically found that when we add money to a situation that operates on social norms, motivation can decrease rather than increase.

when price is not a part of the exchange, we become less selfish maximizers and start caring more about the welfare of others.

If a company can be charged for spewing poisons into the environment, it might well decide, after a cost-benefit analysis, that it can go ahead and pollute a lot more. Once pollution is a market and companies pay for their right to pollute, morality and concern for the environment are nonissues.

I do think that when public policy or environmental issues are at stake, our task is to figure out which of the two—social or market norms—will produce the most desirable outcome. In particular, policy makers should be careful not to add market norms that could undermine the social ones.

All these otherwise good people assume that they understand themselves. But in the heat of passion, suddenly, with the flip of some interior switch, everything changes.

Even the most brilliant and rational person, in the heat of passion, seems to be absolutely and completely divorced from the person he thought he was. Moreover, it is not just that people make wrong predictions about themselves—their predictions are wrong by a large margin.

recent study found that a teenager driving alone was 40 percent more likely to get into an accident than an adult. But with one other teenager in the car, the percentage was twice that—and with a third teenager along for the ride, the percentage doubled again.