- Audible Audio Edition
- Listening Length: 7 hours and 27 minutes
- Program Type: Audiobook
- Version: Unabridged
- Publisher: HarperAudio
- Audible.com Release Date: February 19, 2008
- Language: English
- ASIN: B0014EAHNQ
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Predictably Irrational: The Hidden Forces That Shape Our Decisions Audible Audiobook – Unabridged
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Top Customer Reviews
There are some very interesting anecdotes (for example, do you know why we think black pearls are valuable when originally no one wanted to buy them at any price?) and these are where most of the book's value lies.
The principal weakness comes from Ariely's conclusions based on the work he's carried out. He acknowledges that we humans are "irrational" compared to the straw man of the "rational optimizer" beloved of neoclassical economic theory, but while some of his examples are interesting he fails to see the entire picture. Thus whereas Keen shows that the neoclassical model is computationally impossible, Ariely merely shows that we have different decision-making processes in two distinct contexts: interpersonal and financial. This is valid, but Ariely then goes on to show that he hasn't really explored the interpersonal context with any degree of rigor.
A couple of examples will illustrate what I mean. In the first example Ariely talks about how companies strive to create a "social exchange" in the workplace because people generally work harder and more diligently in social exchange settings than in compensation-based settings. We can think of how we might keep on struggling to get a friend's piano up the stairs of a narrow apartment building long after we'd have given up if we were simply being paid $10 per hour by a stranger to perform the same task. So Ariely notes that companies try to exploit our social side in order to get more work out of us (he doesn't look at the ethics of this attempt, or even at its many infeasibilities). Then he suggests that in order to reinforce the social dynamic and avoid corrupting it with the financial dynamic (because it's not possible to combine the two) companies should not give bonuses but instead should send employees off on a paid-for vacation. The problem, of course, is that most employees don't want to be placed in a parent-child relationship. Most employees think of themselves as independent adults. Saying "here's a vacation we've arranged for you" violates an employee's independence. Worse still it assumes the employee's plans for their free time are irrelevant (the cost of leaving one's home, family, and friends for the duration of the enforced vacation are apparently zero where the company is concerned...). Obviously this recommendation would be disastrous under real-world conditions and one wonders how Ariely failed to think through his proposal.
A second example of this failure to think things through comes with Ariely's analysis of cap-and-trade. Rightly he points out that when you set a price on something (in this case pollution) then people may elect to pay more in order to get more. Just as we might only take a single candy from a tray being passed around the group but might buy ten if the candies are being sold, so too might companies pollute less if pollution were a "social good" rather than a priced good. With cap-and-trade companies might simply elect to pay more in order to feel free to pollute more. So Ariely proposes making pollution a "social good." But again a moment's thought shows this to be absurd. Not only do we have far too many examples of companies being quite happy to pollute when it's a cost-free exercise, Ariely's own book shows that executives will ignore social factors when their focus in on financial rewards. As executives are almost exclusively motivated by fat financial rewards, the notion that they would take social norms into account when deciding whether or not (or how much) to pollute is like saying that investment bankers would put the needs of their clients and the financial system in general ahead of their own desire for the $100 million bonus they get from pushing CDOs onto unsuspecting dupes.
So in the end the book is worth reading for its anecdotal value but not for Ariely's own conclusions or policy suggestions. He's not-quite an economist and not-quite a behavioral psychologist and ultimately that means he's not-quite useful as a guide to policy formulation on either the micro or the macro scales.
Israeli-American professor Dan Ariely holds doctorates in psychology and business. Through appointments at MIT, Stanford, and Duke, he has helped mold the still-young discipline of Behavioral Economics, a research field which examines human choices without preconceived models. His discoveries shed light on human reasoning, and why what seems unreasonable actually serves very consistent purposes. This book provides an interesting thumbnail introduction to a discipline still new and somewhat dangerous.
Consider how people will treasure something that costs more, assuming it’s more effective, better quality, or whatever. Anyone who’s ever slipped box wine into a posh bottle already knows this. Higher prices, subconsciously, translate into better products. Yet the arc shifts when the price hits zero. We’ll chose a measurably inferior but free product rather than pay one thin dime. This seems counter-rational, but actually has well-rooted human behavioral causes.
Late in the book, Ariely writes: “Behavioral economists… believe that people are susceptible to irrelevant influences from their immediate environment…, irrelevant emotions, shortsightedness, and other forms of irrationality.” Though this makes a decent definition of his field, it sounds harsh and judgemental, which this book mostly isn’t. Unlike standard economics, which literally assumes humans are money-driven reason machines, Ariely sees human behavior as driven by forces we cannot see.
However, these invisible forces, unlike the fabled “invisible hand,” actually have measurable traits. For instance, consider volunteer activities. If Habitat For Humanity needed to pay its workers the going rate for construction labor, it couldn’t afford to build homes for the destitute. Why will people people donate freely time and labor they’d charge dearly for if money became involved? Because society is bound together by forces economics cannot value monetarily.
Likewise, given complete impunity, most people will cheat slightly to pursue their own advantage. But most people will cheat far less than they possibly could. What forces keep chiseling to a reasonable minimum? Apparently we have complex neurological structures that let us monitor ourselves, asking whether we’re upholding our own basic judgments. Our brains literally stop healthy people from swindling others. Honesty isn’t merely a morality, it’s a neural imperative.
Ariely demonstrates we could prevent even limited cheating with simple steps. Honesty oaths and honor pledges work effectively, as do simple reminders of moral codes like the Ten Commandments. We can also minimize cheating by keeping consequences close-by and visible, as by transacting business in cash, not credit. The bankers who imploded the economy shortly after this book appeared probably wreaked havoc because, psychologically, they were handling Monopoly money.
Through-lines develop across Ariely’s chapters, without his need to notice. We don’t cheat profligately, and moral nudges halt even minimal cheating, because social standards are based upon trust. Economies where trust runs high, like America, thrive because we’ll keep money flowing, trusting few people will deceive. Economies with limited trust, like Iran, struggle with minimal growth. But it takes remarkably little to undermine trust, and when it’s gone, it’s gone.
These examples aren’t thought experiments or mathematical models. Ariely draws conclusions based on experiments in the laboratory and the field. Some are only possible now because of advancing technology—in one example, a colleague replicates the famous Pepsi Challenge with subjects strapped into an fMRI machine. Others involve simple field tests anyone could replicate by offering free chocolate or beer. But they’re all based on real-life trials and empirical data.
In consequence, these discoveries challenge both the traditional Left and Right in American politics. Because people aren’t theory machines, prefab theories cannot encompass our choices: we’re driven neither by profit, as neoclassical economics insists, nor by the class-based identity Marxism demands. Our motives defy standard categorization, threaten anyone who’d predict or control our choices, and expand regular citizens’ views of themselves and their choices.
Ariely’s experiments make humans more, not less, complex. They demonstrate we’re ore powerful and sophisticated than even we ourselves realize. But our complexity also makes us vulnerable to forces we cannot see externally. Behavioral Economics makes humans both more and less reasonable, both more and less predictable. And in so doing, arguably, it makes us more human, overthrowing the theories which bind us.
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