Predictably Irrational: The Hidden Forces that Shape Our Decisions [Paperback]

This is really a popular psychology book about how we behave and how, as the subtitle puts it, hidden forces influence our everyday decisions. So don't be put off by quotes from businessmen and economists in the blurb. I almost was. But I'm glad I wasn't. This is a neat little book with plenty of nuggets of information and insights that you can put to use immediately. You learn things about yourself and other people that seem so obvious you wonder how you'd never noticed them before and you learn why hunches you've had in the past really are right. Each chapter of this book consists of some simple experiments that are designed to probe a different aspect of our decision-making process e.g. how our expectations affect how we experience things and why too many choices can be unhelpful, to mention just two. The experiments are simple and elegant.

They usually consist of asking two or more differently informed groups of students questions about something. Actually, sometimes the author is a bit vague about the exact experimental conditions, how bias was eliminated from the experiment (particularly with respect to how questions were framed [what language was used] and how the participants were chosen [a few samples were decidedly small]) and how the many variables were isolated and controlled. So in that sense we must take Ariely's word for it. Also, he often vaguely summarises the results of these experiments with words such as "more than" and "most" instead of giving figures. If he were giving a lecture I would have asked him to clarify quite a few points. But all in all I think that this was an interesting book albeit a short one. It is a slim volume and the typeface is quite large. I'm a slow reader and I read it comfortably over two days.

I bought this having seen Dan Ariely speak at LSE recently. He was an engaging speaker and his research sounded interesting.

Having read the book I was left a bit underwhelmed, because I found that I was already familar with both some of the research and a number of the concepts, and was tempted to give it 3 stars. However on reflection that's probably a bit unfair. This is actually a good book for people interested in learning about the field of behavioural economics. It's nicely written with a chatty style, and some of Ariely's research is very interesting.

Just a few snapshots to give you an idea of what this book covers. He looked at subscription packages for The Economist and found that and obviously bad deal led people to choose an option that was like it but obviously better (because it gave them a way to measure the options). In contrast when there were two options that were different but hard to compare they tended to just go for the cheap option.

In a maths test where subjects were given a cash reward based on the number of problems solved and were given an opportunity to cheat, he found that asking them to recall the Ten Commandments ahead of the test appeared to make them less likely to be dishonest.

And in taste tests people prefer Pepsi to Coke when tasting blind, but prefer Coke to Pepsi when they know in advance when they know what they are going to drink. This suggests that we prime ourselves to enjoy something we expect to enjoy.

If this all sounds 'obvious' to you, to some extent you are right (although there are many examples in this field that are counterintuitive). But people like Ariely make the point that although in a 'common sense' way we know that we are easily influenced and 'irrational', policy is often still made with the assumption in mind that we behave as rational self-maximising economic agents.

One point that can be, and often is, made in return is that although behavioural economics is good at describing seemingly irrational behaviour, it is yet to prove itself as a useful resource for designing better policy (although opt-out, rather than opt-in, approaches to both pension saving and organ donation are arguably influenced by behavioural insights). And in fact Ariely's book is at its weakest when he tries to suggest ways that his research findings might inform policy (I'm not surprised that the bank didn't call him back about his credit card idea!).

So for someone such as me interested in policy the book is enjoyable, but a bit limited in value. However if you are new to this field and interested in finding out more this is a good starting place, and you may well find yourself surprised by some of the findings.

The field of behavioural economics is a fascinating one, which has already brought us the wonderful 'Freakonomics'. By comparison to that book this one suffers somewhat, because:

(1) There is an unremitting US-centricity here. All the examples and experiments are about typically US topics, all the conclusions are spelled out in a US context.

(2) The findings are often used as a launching point for some thoroughly unscientific moralising about how society ought to act differently.

(3) The experiments all seem rather narrow in scope. None is repeated and all seem to run on a rather small scale. It seems that as soon as one experiment throws light on a curious behaviour, it is time to move on to the next. I suspect the writers of 'Freakonomics' might have found more data to explore more fully aspects of the behaviour each time.

I was also annoyed by several chapters containing an appendix which appears right after the chapter, rather than all residing at the end.

On the plus side, Ariely writes engagingly and describes the experiments with a fair amount of humour. I paricularly enjoyed his descriptions of the experiment testing the effect of arousal on judgment.