Friday, October 24, 2008

Predictably Irrational by Dan Ariely

Predictably Irrational is another is a recent spate of popular books on economics, although this one takes on the specific branch of economics called behavioral economics. Orthodox or regular economics bases the body of its knowledge on the assumption that men and women are rational actors that will always act in their best interest. Behavioral economics is a recent revolt against this assumption of rationality. Taking their cue from what psychologists have known for decades, namely that men and women do not always act rationally, behavioral economists try to find circumstances under which this assumption of the rational actor fails. They seek, in other words, circumstances in which men and women will act predictably irrational.

I found this book quite enjoyable. I will admit, however, to a special place in my heart for this type of research. I have a B.S. in psychology and actually went back to college as an older adult to study economics. I have also enjoyed other books of a similar vein: Freakanomics by Levitt and Dubner and The Undercover Economist by Tim Harford. I also have quite a few popular economics books on my shelf to be read: The Logic of Life by Harford, Discover Your Inner Economist by Tyler Cowen, The Armchair Economist and More Sex is Safer Sex both by Steven Landsburg. So, I was probably already inclined to enjoy this book.

Each chapter consists of a description one or a group of clever and fascinating experiments. From these, Ariely draws a clearly stated conclusion about human behavior, about how we all act predictably irrational. What I liked most about the book was his admonition in the book's introduction:
To get real value from this, and from social science in general, it is important that you, the reader spend some time thinking about how the principles of human behavior identified in the experiments apply to your life. My suggestion to you is to pause at the end of each chapter and consider whether the principles revealed in the experiments might make your life better or worse, and more importantly what you could do differently, given your new understanding of human nature. This is where the real adventure lies.

Now, this advice applies to each and every book you read. But as per this particular book, there were several cases where I could see my own predictably irrational behavior in the description of how participants in the experiments acted. For example, Chapter 4 is subtitled Why We Are Happy to Do Things, but Not When We Are Paid to Do Them. I found a lesson in this chapter because, when my wife's employer transferred us, I retired at an early age. I had been a computer programmer and found myself volunteering to help my wife by creating Excel Add-Ins to make life a little easier for her and the rest of the finance department. I actually enjoyed doing it. This year, they decided to significantly raise their commitment to increasing their productivity, so they hired me as a consultant to write more Excel Add-Ins. Suddenly, instead of an interesting diversion from my normal routine housework and reading, programming these Add-Ins became a drag, a chore. They became work. After reading Predictably Irrational, I see how irrational this is. It is the same activity I was happy to do for free a year ago. So, now I make a more conscious effort to enjoy myself while programming the Add-Ins for my wife's company.

I highly recommend this book to anyone interested in human behavior. It is full of wonderful insights that will help you understand why people do some of the silly things they do, and why you do them too. I enjoyed it so much that after I return the library's copy I want to buy my own.


1 comment:

Mis proyectos académicos said...

In this blog I expose something similar, though my idea is less brilliant than Dan Ariely's approaches. The Spanish university is very bad, I am sorry.