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| Predictably Irrational: The Hidden Forces That Shape Our Decisions | 
 enlarge | Author: Dan Ariely
Publisher: HarperCollins
Category: Book
List Price: $25.95
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Avg. Customer Rating:  146 reviews
Sales Rank: 72
Format: Roughcut
Media: Hardcover
Number Of Items: 1
Pages: 304
Shipping Weight (lbs): 1.3
Dimensions (in): 9.1 x 6.5 x 1.2
ISBN: 006135323X
Dewey Decimal Number: 153.83
EAN: 9780061353239
ASIN: 006135323X
Publication Date: February 19, 2008
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Product Description
- Why do our headaches persist after taking a one-cent aspirin but disappear when we take a 50-cent aspirin?
- Why does recalling the Ten Commandments reduce our tendency to lie, even when we couldn't possibly be caught?
- Why do we splurge on a lavish meal but cut coupons to save twenty-five cents on a can of soup?
- Why do we go back for second helpings at the unlimited buffet, even when our stomachs are already full?
- And how did we ever start spending $4.15 on a cup of coffee when, just a few years ago, we used to pay less than a dollar?
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? In a series of illuminating, often surprising experiments, MIT behavioral economist Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. Blending everyday experience with groundbreaking research, Ariely explains how expectations, emotions, social norms, and other invisible, seemingly illogical forces skew our reasoning abilities. Not only do we make astonishingly simple mistakes every day, but we make the same types of mistakes, Ariely discovers. We consistently overpay, underestimate, and procrastinate. We fail to understand the profound effects of our emotions on what we want, and we overvalue what we already own. Yet these misguided behaviors are neither random nor senseless. They're systematic and predictable—making us predictably irrational. From drinking coffee to losing weight, from buying a car to choosing a romantic partner, Ariely explains how to break through these systematic patterns of thought to make better decisions. Predictably Irrational will change the way we interact with the world—one small decision at a time.
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| Customer Reviews: Read 141 more reviews...
 Welcome to the fuzzy world of being human. February 19, 2008
138 out of 172 found this review helpful
Dan Ariely is the guy you'd want at your dinner party. He's witty, smart and also very inclusive - sharing his passion for the way humans tick in a way that makes us feel great about the fact that, rational as we like to think we are, we make bad snap decisions, we cheat and we get ruled by our heart precisely when the facts are screaming "go the other way!" There's a lot in this writing which celebrates our human-ness. Why do we do this?
What Ariely has done here is shift a lot of the thinking developed by such pioneers as Kahneman & Tversky who worked in behavioural economics, and moved it into the everyday sphere. And he's done a great, insightful job. Where the behavioural economists are focused on financial decisions (why we buy high and sell low - and confound the assumptions of the classic economists who assume 'the rational man,) Ariely eschews the technical language and walks us through everyday examples of our often fuzzy and quite irrational decision-making.
The result is utterly engaging - and this easy 300 page read still has academic rigour and strong foundations. Ariely cites many experiments and examples, and shows that we often get things wrong because we frame things the wrong way, mis-judge probabilities, apply heuristic rules of thumb that don't always work, or we just plain let our emotions rule.
We love to think that we're educated, rational and moral. Yet who hasn't overestimated the upside on a sure-fire investment, bought some clothing that we knew was a mistake even as we bought it, or got our wires crossed between work-rules and social rules? This book is fascinating, entertaining and very, very illuminating.
- Recommended for the general public, but I'd urge marketers, market researchers and business people to read this one carefully. Dan provides excellent dinner-party insights, but they apply to our real world and explain why so many poor decisions are made - whether by customers or by the 'rational' business people who make million-dollar decisions.
- Recommended companion book: Nudge: Improving Decisions About Health, Wealth, and Happiness here one of the godfathers of behavioural economics discusses the way we can manage the "choice architecture" in our world.
 Irrational? Not. Well, not always. March 4, 2008
128 out of 178 found this review helpful
Self-help books are among the hottest sales items in your favorite book store, right after Gothic novels and cookbooks. Many people are dissatisfied with their lives and don't quite know why. Self-help interpretations claim they offer helpful psychological insight, but do they? Freud gave us the quite valuable notions of id, ego, and superego, but also the quack notions of penis envy and oedipal complex. Later generations of self-help pop psychologists turned Freud into a cash cow of dangeriously overused but highly fashionable slogans, such as psychosomatic illness, inferiority complex, repressed memory, childhood trauma, and hysterical conversion syndrome.
Freudian psychology is just about dead in the self-help arena, but now we have a new contender for leader of the pop psychology: behavioral economics. Ariely's is one of several new books that take the experimental results of the past quarter century and turn them into self-help. The main message is that we are irrational, but if we understand and correct for this, we can overcome our irrationality and improve our lives. "We are pawns in a game whose forces we largely fail to comprehend," says Ariely. "Although irrationality is commonplace," he continues, "it does not necessarily mean that we are helpless. Once we understand when and where we may make erroneous decisions, we can try to be vigilant." (p. 243)
Like Freudian psychology, behavioral economics gives us a few critically important insights, including hyperbolic discounting, excessive pattern-finding, loss aversion, status quo bias, and innate altruistic cooperation and punishment. However, just as Freud was mostly wrong (and therapeutically a high-maintenance disaster), so is behavioral economics, although I doubt that people will be paying $200 per hour to sit on a couch with a behavioral economics therapist.
Now, Ariely in no way distorts the writings of the behavioral economists in this book. Ariely is a jolly guy who is hard not to like, and he uses his charm to push a popular version of the beliefs expressed in the technical journals and books all the time: the rational actor of economic theory is all wrong, and irrationality is pervasive. "People are not logical---they are psychological," as the saying goes.
Despite the extreme value of their experiments, the behavioral economists are mostly a theoretically ignorant and indolent lot, who content themselves with showing that a highly stripped-down version of the rational actor model is wrong, and conclude, sloppily and without warrant, that "people are irrational." Of course, the greatest behavioral economists have developed better models of human behavior that explain the experimental evidence, but these models are simply sophisticated versions of the rational actor model, not their antithesis. For instance, Kahneman and Tversky's `prospect theory,' for which Kahneman was awarded the Nobel prize in Economics, replaces the standard economic utility function with one with a kink at the individual's current position. Similarly, the various models of altruistic behavior are based on expanded utility functions that included caring, positively or negatively, about the welfare of others. There is absolutely nothing "irrational" about altruism.
Another set of behavioral findings is that people do not always make choices that are in their own interest. Some of these result from people having incorrect theories about the world. For instance, there are various "pop probability theories" that are incorrect and will lead people who follow them to lose lots of money. However, ignorance is not irrationality, and given their incorrect beliefs, these individuals perform exactly as predicted by the rational actor model. Other welfare-reducing choices stem from hyperbolic discounting. However, if we replace the standard exponential discounting model with a hyperbolic discounting model, we remain within the fold of the rational actor model, just with a more plausible preference ordering (see my Behavioral and Brain Sciences article or the draft of my game theory text, The Bounds of Reason, on my web site, for details).
Ariely is a creative experimenter with zero capacity to deal with economic theory. By accepting the behavioral paradigm ("people are not logical, they are psychological"), he makes it in principle impossible to explain his experimental results. Take, for instance, the wonderful experiment he carried out in a tavern in university town in the USA. Disguised as waiters, and with the permission of the establishment, Ariely and his assistants offered 2 oz. of complimentary beer to clients. There were four types of beer with names that indicated nothing about their taste or quality, and clients at each table were asked to state publically which beer they wanted. He found that clients were averse to making the same choice as others at their table, so for instance, at a table with four clients, each would ask for a different type of beer. This is because, he said, Americans value individuality. He performed the same experiment in Hong Kong, finding that clients tended to choose the same type of beer, confirming that the local culture valued conformity.
This is a great experiment, but where is the irrationality? Is it irrational to value conformity or diversity? I think not. Moreover Ariely stacked the deck in his favor by ensuring that the real qualities of the beer were unknown, so clients should be indifferent among them. This self-serving experimental design (behavioral economics often use self-serving designs without acknowledging this fact in any way---why they get away with it I cannot imagine) was bound to make "culture" trump "preferences," Why not do the experiment with known beer types? Or better yet, vary the delay in delivering the beer in the four choices, so you can get one type after a 20 second delay, a second type after a 40 second delay, etc. Why not use consumer choice theory to judge the strength of the desire for conformity or diversity, rather than just saying "people are irrational" and attempting no plausible explanation of behavior?
Ariely is certainly correct that behavioral economics has some important things to tell people about living their lives. Seeing patterns where there are none can lead to disastrous, and wholly avoidable, financial decisions. The savings rate in America can be increased by employers making 401k contributions the default condition. But, most of the behavior illuminated by behavioral experiments is not irrational and there is no reason for people to change it. Understanding why we behave as we do is valuable in its own right, without having to contribute to solving our life problems. More important from my view as a modeler of human behavior, we must stop using the i-word to keep us from developing cogent analytical models of human behavior. I am virtually certain that all such models will be extensions of the rational actor model of economics that reduce to the traditional model when appropriate assumptions holdsuch as correct beliefs and perfect knowledge of preferences.
Almost Did Not Buy, Reviews Too Negative--This Was Worth My Time March 29, 2008
85 out of 126 found this review helpful
I almost did not buy this book as I sought to explore the new literature on behavioral and cognitive science. The negative review are too negative. You get from this book what you bring to it in open mindedness, in my opinion.
My truth-teller, off-setting the reality that this is a double-spaced book that inflates 120 pages of thought into 240 pages of easy to digest presentation, is the author's unique provision in the end-notes of both direct references to seminal works that each chapter is based on, with additional references suggested, AND his recognition of 17 collaborators, each with a long paragraph of biographic information. This is in short a worthy work, it was worthy of my time, and I do not agree with those who are dismissive or cavalier about this book.
As with Nudge: Improving Decisions About Health, Wealth, and Happiness and other works of this ilk, they seem to be blessed with an immaculate conception that fails to recognize the work of the 1960's and 1970's (e.g. Herbert Simon, "satisficing," but I no longer mark this down--this is a new generation thinking new thoughts, and I have decided it is too much to expect them to go back more than 20 years.
The opening of the book is impressive. The author was burned on 70% of his body by a magnesium flare, and his probing of his own pain and how the nurse's had settled on fast painful ripping off of the bandages (with no medication.
Key point early in the book: most people don't know what they want until they see it in context. This is one reason I am planning an edited work in 2009 on Cultural Intelligence. As Howard Bloom teaches us in Global Brain: The Evolution of Mass Mind from the Big Bang to the 21st Century, we (and our policy makers) know nothing of "the other," and I have concluded that peace starts in kindergarten and we have to separate the Israelis and the Palestians, and literally baby sit two new generations from birth to the age of 35.
The rest of the book is easy to read, has excellent real-world examples, and each chapter generally ends with a short appendix with real results. This is not a fluff book, it is a serious book that the light reader will mistake for fluff.
+ Relatively and "bracketing" matter (sell what you want by bracketing it with a more expensive option above and a trashy cheap thing below)
+ Decoys matter (e.g. a middle option that makes the "combined option" a "no brainer")
+ Publishing salaries actually sets off ego wars at the top and churn at the bottom that leads to more turnover and more wasteful employees costs.
+ Imprinting is used by the author to explain "anchoring" (e.g. black pearls anchored in setting of most expensive diamonds, this is an example of how the SELLER is setting the price, not the buyer).
+ "Free" is never really free. It can blind rational choice and it can "cost" time, choice, and a higher value that is obscured (e.g. my cotton socks disintegrate within months, whereas the cotton socks I inherited from an earlier era are still lasting forever).
+ HOWEVER, I especially liked the way the author explored "free" as a device for policy furtherance, e.g. make vehicle registration "free" if you own a hybrid car.
+ Social versus market norms are discussed. The author does not discuss Open Money (see my comment for a link to my keytone at Gnomedex) or Yochai Benckler's [[ASIN:0300125771 The Wealth of Networks: How Social Production Transforms Markets and Freedom].
+ I especially like the way the author discussed how the poorly-paid border patrol and coast guard employees have made their own peace with the drug dealers--they have the same understanding the CIA clandestine service has with the KGB and local counter-intelligence services: we do not kill, kidnap, or even embarrass each other, we all just present to bedoing our job and the only people fooled are Congress and the taxpayers. Similar, the drug dealers understand that if they do not shoot to kill, neither will we....
+ One chapter offers a fascinating study on the impact of sexual arousal (a marker for passion). This quote from page 97 is priceless:
"Prevention, protection, conservatism, and morality disappeared completely from the radar screen. They were simply unable to predict the degree to which passion would change them."
+ The author discusses Smart Cards and their ability to impose a restraining influence with emails, I urge one and all to dump their existing ursurous cards and turn to Interra and other similar community-based cards with high social value.
+ We over-value what we own or possess. (I would add, we also over-value credentialing and under-estimate how painfol our rote school system is, which kills creativity by the seventh grade in some of our brightest kids.)
+ Stereotypes influence behavior on both sides of the viewpoint.
+ Placebo effect is real, something the American Medical Association absolutely does not want you to know (see also Alternative Cures: The Most Effective Natural Home Remedies for 160 Health Problems among many excellent works in this area.
+ Options can confuse and divert.
+ There is a pricing effect (very high priced menu item drives folks toward the second most expensive, which they would not have chosen absent the "higher" bracket item)
+ Character costs. USA loses $525 million a year to robberies, and $600 BILLION a year to employee theft (this does not count procrastination and government issues, such as every second IRS employee a complete loser while the others do twice the work).
+ Harvard MBA students participated in a series of tests that conclusively demonstrated that people will cheat if given an opportunity to do so; they will cheat twice as much with "in kind" versus cash opportunities, but they will not cheat "wildly" even if assured of not being caught. See also The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead
+ Religion DOES have a good moral effect, as do honor codes and reminding people of the Ten Commandments from time to time. See Founding Faith: Providence, Politics, and the Birth of Religious Freedom in America for the Founding Father's deliberate mix of securlar tolerant government with a desire for a strong religious aspect to community for precisely this reason.
I can see how some might feel this book is less than they were expecting, but I do not agree. This book may be well-marketed and not the deep social science research that some buyers might have been hoping for, but I for one find it completely satisfactory and well worth my time. The author's crediting of 17 collaborators, and the unique goodness of the end-notes carry the day with me.
See also
The World Cafe: Shaping Our Futures Through Conversations That Matter
Society's Breakthrough!: Releasing Essential Wisdom and Virtue in All the People
Building a Knowledge-Driven Organization
Collective Intelligence: Creating a Prosperous World at Peace
My earlier lists (the first ten or so out of 70) focus on strategy, intelligence, information, and offer many other pointers to useful books somewhat related to the larger universe of cognitive science and decision support.
 un-predictably irrational March 18, 2008
34 out of 78 found this review helpful
I purchased the book to learn something about the human nature. I found author's examples of irrationality interesting but quite obvious to anyone who is even marginally observant. Since the human behavior interests me, I read the book.
Then the author came to a surprising conclusion - the free market price mechanism is not working because the people make decisions irrationally. It is some time since I read the Wealth of Nations, but I do not recollect rationality as the condition for free movement of price.
Not content with that strange reasoning, the author capps it with a whopper: The government policies are needed for markets to work "for the best". Now that is REALLY irrational!
I finally lost it when the author advises return to the "social norms" to replace "market norms". Anyone with cursory knowledge of 20th century history will recognize this as socialism - you work for your Socialist state, your Fuehrer, your "society", not for money. There is name for complete replacement of "market norms" with "social norms" - it is called SLAVERY.
I bought the book to learn about irrational human behavior. The book is irrational, but in an unpredictable way.
Exploring why so much of what we do doesn't make sense February 19, 2008
27 out of 37 found this review helpful
I had the privilege of taking Dan's class at Duke last fall, where all of us got the chance to read preview copies of Predictably Irrational. Of course, not everyone will get the chance to hear Dan's excellent lectures, but the book does a great job of capturing his wit while providing a wealth of information about why human behavior can be as fallible as it is.
The joy in this material lies in the fact that every few pages you will find yourself smiling because you too have behaved in the irrational manner being described, and now that you look back on it, it's hard to remember why.
Why are we so excited about free stuff, even if we just throw it out later? Do we convince ourselves that an expensive meal will taste better than a cheap one? And why are we motivated to act on some humanitarian disasters, but not others? We all make irrational decisions at times, but this book provides the rare opportunity to reflect on those decisions and observe the behavioral patterns underneath.
If you enjoyed Freakonomics or any of Malcolm Gladwell's writings, you will also enjoy Predictably Irrational. The pace is quick, and nearly every page contains some nugget of surprising information that you'll want to tell your friends. It is more like Freakonomics than Blink or The Tipping Point in that it is structured around experiments, with each chapter covering the results of experiments in a specific area of irrational behavior, the implications for society, and what individuals might do to mitigate it.
It's a hard book to put down, and it's both entertaining and interesting from start to finish. For those who are curious about the world, this might be the ultimate beach or airline reading!
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