Book Review Predictably Irrational by Dan Ariely
Behavioural Economist Debunks Conviction in Human Rationality
Oct 1, 2009
Conventional economics is enamoured with rationality and the idea that people constantly weigh their decisions in terms of cost and benefit. In the wake of recent economic events, a revised version of Ariely’s bestseller, Predictably Irrational: The Hidden Forces that Shape Our Decisions, questions this assumption and addresses the grey area between how people think they behave and what they actually do.
Irrational Behaviour
Ariely examines choice, cheating, decision making when sexually aroused, procrastination and ownership in a revealing look at human nature which only the most egotistical rationalist could ignore. It seems no one is immune from irrationality, even experts such as financial mortgage lenders, CEO’s and global economic watchdogs. Apparently, if one is human, one is susceptible to repeated errors of judgement.
“We are really far less rational than standard economic theory assumes. Moreover, these irrational behaviours of ours are neither random nor senseless. They are systematic, and since we repeat them again and again, predictable,” the author says.
Via a series of experiments designed to highlight the process of decision-making, Ariely constructs a compelling argument for the presence of an underlying and persistent irrationality at work.
Relative Decision Making
In an experiment conducted among 100 MIT students, Ariely utilised a recent advertisement for magazine subscriptions, which offered an online subscription for $59, a print subscription for $125 and a print and internet combo at $125. When he asked the students to choose which of these options they would purchase, they predominately chose the print and internet combo, then the on-line subscription, with the print-only version scoring no preferences at all.
Ariely then tested again after removing the print-only version as an option. He contends that rational behaviour would dictate choices in the next sample group would remain largely unchanged. This prediction proved incorrect. In fact, without the unpopular print-only option to compare to the other choices, many respondents changed their minds.
According to Ariely, people are hardwired to compare things when it comes to decision making. “Most people don’t know what they want unless they see it in context.” In short, decisions can be skewed by the range of options on offer.
The Real Truth About Human Behaviour
Interestingly enough, if everything is relative, there may be no better time for Dan Ariely’s book, Predictably Irrational. With the choice between a steadfast belief in human rationality and the possibility of recurrent human fallibility set against a backdrop of financial meltdown, the decision seems obvious, even liberating....at least until the next housing boom. If Ariely is correct, by then the lessons may be forgotten.
Clearly, this is a book which really bends the mind. While it is playful at times, its message is intriguing. Possible answers to recent events beg more questions. For example, if underlying beliefs in human rationality underpin both individual and institutional decision making, head scratching is inevitable over an inability to diet or factor in the ramifications of a thirty-year loan. However, what would happen if beliefs changed and human irrationality was a given?
The Verdict
Dan Ariely’s, Predictably Irrational, the Hidden Forces that Shape our Decisions, is a book which will stay in the head for a while if the reader has an interest in human nature and/or out-of-box thinking. It may even be an ‘elephant in the room’ experience for some. At the very least, Ariely’s experiments into human behaviour are ripe for dinner party conversation, but beware. To a die-hard rationalist, defending a position may appear rational, even when it’s not.
The Details
Author - Dan Ariely
Title - Predictably Irrational, the Hidden Forces that Shape our Decisions
Publisher - Harper Collins
Date - 2008 (original) 2009 (revised)
IBSN - 978-0-00-725653-2
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