{"id":7012,"date":"2019-02-12T18:12:43","date_gmt":"2019-02-13T02:12:43","guid":{"rendered":"https:\/\/www.markrkelly.com\/Blog\/?p=7012"},"modified":"2023-10-10T15:02:24","modified_gmt":"2023-10-10T22:02:24","slug":"ariely-predictably-irrational","status":"publish","type":"post","link":"https:\/\/www.markrkelly.com\/Blog\/2019\/02\/12\/ariely-predictably-irrational\/","title":{"rendered":"Ariely: PREDICTABLY IRRATIONAL"},"content":{"rendered":"<p>Dan Ariely&#8217;s <a href=\"http:\/\/www.amazon.com\/gp\/search?keywords=ariely+irrational&amp;index=books&amp;linkCode=qs&amp;tag=sciefictaward-20\">PREDICTABLY IRRATIONAL: The Hidden Forces That Shape Our Decisions<\/a> (Harper 2008) is one of the earliest popular books that summarizes various findings of experimental psychology in recent decades that reveal the biases of human nature.<\/p>\n<p>Key point: traditional economics assumed that people are rational individuals. But in fact, humans are not only irrational, they are irrational in predictable, systematic ways.<\/p>\n<p>The thirteen chapters explore examples, in the Malcolm Gladwell mode of telling stories and drawing conclusions (though without much underlying interest in the mechanisms that explains *why* we behave like this, e.g in terms of evolutionary psychology; there are other books for that). Here&#8217;s one bullet per chapter summary.<\/p>\n<ul>\n<li><strong>Everything is relative<\/strong>: how subscription forms plant decoys, or surveys anchor with photos of handsome students or houses. We make choices based on comparisons, not by any absolute standards. How to control this? Reduce the circle of comparison. Realize that the more we have, the more we want; so consciously reduce one\u2019s expectations.<\/li>\n<li><strong>The fallacy of supply and demand<\/strong>. How to increase the demand by simply raising the price. People imprint on the first idea they see: anchoring. The initial anchors can be arbitrary. Thus: realize that life decisions may be based on \u2018arbitrary coherence\u2019 \u2013 contingencies, randomness. And so question such decisions. And: \u201ca free market based on supply, demand, and no friction would be the ideal if we were truly rational. Yet when we are not rational but irrational, policies should take this important factor into account.\u201d P48.<\/li>\n<li><strong>The cost of zero cost<\/strong>: it\u2019s fun to get free stuff, and so Amazon sales boomed when they offered free shipping, and cars sold better with deals for free oil changes. So apply this to social policy: make wise preventable measures free.<\/li>\n<li><strong>The cost of social norms<\/strong>. We\u2019re happy to do things, but not when we\u2019re paid to do them, e.g. working for a cause rather than for cash. Fining parents for being late to pick up their kids made the problem worse, because it removed the social obligation factor and reduced it to a cash transaction. So: Education might be enhanced by switching to social goals, rather than focusing on taking tests. Example of Burning Man, and its gift exchange economy.<\/li>\n<li><strong>The influence of arousal<\/strong>. We take greater risks when aroused or angry, confirmed in psychology tests. So: take this into account in advance; carry condoms, even if pledging to say no; don\u2019t drive or make decisions when upset.<\/li>\n<li><strong>The problem of procrastination and self-control<\/strong>. Over and over again experiments show that people put things off \u2013 even when allowed to set their own deadlines in advance! Solutions: force commitment in advance, e.g. regulations to enforce health checkups; how auto makers bundle maintenance into periodic service checks. [Everyone does this now.]<\/li>\n<li><strong>The high price of ownership<\/strong> \u2013 why we overvalue what have. An experiment with basketball tickets given by lottery; once the winners had their tickets, how much would they take to sell them? Vs. how much would those who didn\u2019t get them pay to get one? The former valued them much more. When we have something, especially if we\u2019ve put work into it (like assembling Ikea furniture) we value it more. Similar comments about ownership of ideas, and why we\u2019re reluctant to change our minds; ideologies. (No cure for this, except to try considering transactions from the POV of a non-owner.)<\/li>\n<li><strong>Keeping door open <\/strong>\u2013 why options distract us from our main objective. Examples of choosing a major, or a boyfriend; we\u2019re reluctant to commit when many options are available. Solution: start small, close some doors, and move on. The consequences of not deciding at all can be worse in the long run.<\/li>\n<li><strong>The effect of expectations <\/strong>\u2013 why the mind gets what it expects. How opposing fans watching the same game interpret it very differently. How taste tests turn out differently when products are described beforehand, or afterwards. Caterers and advertisers know this; it\u2019s called priming. Solution: consider both sides of a conflict without knowing who\u2019s on which side.<\/li>\n<li><strong>The power of price<\/strong>. How various surgical procedures have been revealed as mere placebo exercises. (It\u2019s apt to realize that *all* early medical procedures \u2013 eye of newt, etc. \u2013 relied on placebo effects.) Prescriptions drugs vary in effect on how they are described and priced. If placebos work, why not enjoy them? Because they drive up the cost of health care.<\/li>\n<li><strong>The context of our character <\/strong>\u2013 why we\u2019re dishonest. When given a chance to cheat, everyone cheats \u2013 but just a little. Experiments show that when reminded of the 10 commandments \u2013 or any other ethical standard, like a professional oath \u2013 people cheat less. Professions were de-regulated in the \u201860s, and has led to declines in standards. What to do? Perhaps practices like signing a code of honor will actually lead to better behavior. [ Matthew Hutson describes this as one of his 7 laws of magical thinking, in a book whose theme is that you can be aware of these effects *and still employ them* to lead to better behavior. ]<\/li>\n<li><strong>The context of our character part 2 <\/strong>\u2013 why dealing with cash makes us more honest. Students take Cokes left in dorm refrigerators \u2013 but not dollars from a plate of cash. Cheating is easier if it\u2019s removed from actual money. Thus complex financial schemes enable corporate misdeeds, e.g. Enron. Upton Sinclair, quoted p227: \u201cIt is difficult to get a man to understand something when his salary depends upon his not understanding it.\u201d This is a problem because cash is going away in the modern economy, and schemes like airline frequent flier miles and credit card interest rates, all very abstract, make cheating easier.<\/li>\n<li><strong>Beer and free lunches <\/strong>\u2013 what is behavioral economics, and where are the free lunches? When people in a group place their orders in a pub, they are affected by the orders of those who spoke first \u2013 not to be the same, but to be different, to the point of not ordering what they truly want, out of a \u2018need for uniqueness\u2019.<\/li>\n<\/ul>\n<p>This final section concludes how we\u2019ve seen how economics is not about rational decisions. So shouldn\u2019t economics be about how people actually behave? Here\u2019s the free lunch: do we take these recognitions of irrationality and recognize them as opportunities to improve? Page 243:<\/p>\n<blockquote><p>If I were to distill one main lesson from the research described in this book, it is that we are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the driver\u2019s seat, with ultimate control over the decisions we make and the direction of our life takes; but, alas, this perception has more to do with our desires\u2014with how we want to view ourselves\u2014than with reality.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Dan Ariely&#8217;s PREDICTABLY IRRATIONAL: The Hidden Forces That Shape Our Decisions (Harper 2008) is one of the earliest popular books that summarizes various findings of experimental psychology in recent decades that reveal the biases of human nature. Key point: traditional &hellip; <a href=\"https:\/\/www.markrkelly.com\/Blog\/2019\/02\/12\/ariely-predictably-irrational\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,20],"tags":[],"class_list":["post-7012","post","type-post","status-publish","format-standard","hentry","category-book-notes","category-psychology"],"_links":{"self":[{"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/posts\/7012","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/comments?post=7012"}],"version-history":[{"count":13,"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/posts\/7012\/revisions"}],"predecessor-version":[{"id":20089,"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/posts\/7012\/revisions\/20089"}],"wp:attachment":[{"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/media?parent=7012"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/categories?post=7012"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.markrkelly.com\/Blog\/wp-json\/wp\/v2\/tags?post=7012"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}