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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:  (156 reviews)
Sales Rank: 169
Format: Roughcut
Languages: English (Original Language), English (Unknown), English (Published)
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
Release Date: February 19, 2008
Availability: Usually ships in 1-2 business days
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| Customer Reviews:
 We are KNUCKLEHEADS! March 5, 2008
6 out of 8 found this review helpful
We humans are knuckleheads. That's what you will surmise from the countless entertaining studies and anecdotes that Ariely describes in this fantastic book about behavioral economics. Why else would we let something as seemingly irrelevant as a Social Security number determine how much we'd pay for a bottle of wine? Why else would we easily steal a pen, but wouldn't consider taking the cash equivalent of that pen? Why else would we pick a beer that we don't want just if it was the only one not ordered by our friends? These are the type of things that Ariely seeks to uncover in "Predictably Irrational" and, which, coincidentally act as a fantastic support for the financial behaviors I describe in How to Take Advantage.... Ironically, however, the fact that Ariely is so successful at explaining these quirks in human behavior works directly against the thesis of the book itself.
Ariely says his field, behavioral economics, takes a novel twist on the traditional science of economics. Instead of assuming that we humans have all the appropriate information about our decisions, he argues we make mistakes in the real world--that we're irrational. But if that really were the case, Ariely's book wouldn't be very good. On the contrary, we let our Social Security number affect our wine budget when it's used as a necessary frame of reference; we see a pen as worthless because it's once-removed from cash; and we order a different beer to satisfy our social needs to be unique. There ARE reasons why we do things and that makes all this whacky behavior just seemingly irrational, not truly irrational.
Another book, The Logic of Life, uses the same type of studies to show exactly that: seemingly irrational behavior in society actually makes sense when you can uncover the ulterior motives and forces that act on us.
The fact that Ariely misses this should not deter anyone from reading it--it's a wonderful and well-written book that will open an eye or two as to the reasons why we do such SEEMINGLY irrational things.
An adventure in human psychology! March 4, 2008
2 out of 6 found this review helpful
This was an insightful fun read. I bought it one day, started reading it, and ended up finishing it the next day. I usually don't finish books that fast, but this was fun. Quite an adventure in human psychology!
Very fun read... could not put it down....full of insights, cool research, etc.
 Irrational? Not. Well, not always. March 4, 2008
129 out of 180 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.
Lucid, Engaging, Useful March 3, 2008
4 out of 8 found this review helpful
Why do we do what we do? Ariely offers some useful answers. Look at the idea of Free. Charge someone a dollar for a service, a la shipping by Amazon, and no increase in book sales. Offer it as Free and sales rocket. We react to the Power of Zero even if it is not in our long term economic interest. But the best value is in the last half where he talks about creating the right conditions for creating ethical conduct. An experiment is designed: three groups---one group is unable to cheat by design, another can cheat by design, and a third can cheat by design but is asked to either write down the ten books they read in high school and the other the Ten Commandments. The results ? The one that can cheat does, albeit not by much, but the group that can cheat but wrote down what they recalled of the Big Ten, did not. He applies this in an interesting discussion of the professions. Personally, as an employment lawyer, I see lots of applications in the workplace. Great stuff. Looking forward to the blog.Thanks.
Starts with a bang March 2, 2008
2 out of 6 found this review helpful
This book starts strong but weakens on substance. As the book moves past the half-way point it has little to offer that is not already very common knowledge. Writing for the masses should not result in less substance simply to produce acceptable length.
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