Classical economic theory is predicated on self-interested rational actors. But people aren’t rational. So much the worse for classical economics.
Although people aren’t rational, they aren’t randomly irrational, either. Instead, they are predictably irrational, in a way that can be studied and measured, and be built into a more realistic economic theory: behavioural economics.
Dan Ariely, psychologist and behavioural economist, engagingly describes a range of experiments he and his colleagues has performed (mostly on undergraduate students, in the time-honoured experimental psychology manner) to unpick a wide range patterns of irrationality. He looks at the over-strong lure of free items, how we overvalue our possessions, how keeping options open can be a mistake, why shops will often display an expensive option they don’t expect to sell, why we are happy to do things for free we wouldn’t do if paid for, how more expensive items are more effective than identical cheaper ones, how dishonesty varies when cash is involved, how some people choose second best, and more.
I found the chapter on free work versus paid work interesting, the difference being between social norms and market norms. The world is moving us towards the latter, seemingly to the detriment of enjoyment. Similarly the chapter on honesty highlights how people are more honest when cash is involved: while taking a pencil from work is barely noticed, taking the equivalent value in cash would be beyond the pale. Yet we are moving towards a cashless world, maybe to the detriment of honesty?
This is a good read, with the experiments clearly described, and the context and consequences well explained. I am not entirely convinced that the experimental situations, with their small values and low consequences, can be safely extrapolated to larger scale cases, but they are very illuminating. Several of the examples will be useful to help avoid faulty reasoning in certain cases. (Although I already order what I want from the menu, whether or not someone else in the party has previously ordered the same.)
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Reviewed in the United Kingdom on 1 January 2019
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Reviewed in the United Kingdom on 14 July 2016
In one of the amazing studies in the book he shows for instance that the way we ‘frame’ something (p. 41) often determines how others are going to take it (remember Tom Sawyer and how he got his friends to paint that wall? For classroom management purposes, this is crucial; if we introduce activities saying ‘Now, this may hurt a little...’ chances are students are going to feel the pain!)
This leads to the hugely important subject – expectations: quick Q: would you like a beer with a drop of balsamic vinegar in it? (p. 159) A: It depends on whether you know it in advance or not! If you do, chances are you are going to dislike it. Expectations colour perceptions. How many times has this prejudiced us against certain students?
Ariely’s interests range from beverages to education. Here is another Q for you: which students have better results: those who are free to choose their own deadlines, or those where the professor ‘democratically’ decides for everyone? Incredibly, it is the latter! (p. 115) This finding may go against our cherished beliefs, but in fact it ties in very smoothly with notions of ‘ego depletion’ (Baumeister). The very process of deciding exhausts us, with the result that we are both more stressed and produce poorer-quality work.
Ariely writes in the simple, effortless and straightforward style that you find among people with a real command of their subject. Rather than bombarding the reader with studies and facts, he goes through each experiment in detail, ensuring that the reader manages to grasp the key concept in all its fine details. He then goes on to consider the possible applications of the findings in various fields of life – not just work. Yet what I like best about this book is that he also uses examples from his own life – sometimes funny, sometimes poignant.
OK – now here is one last idea from the book: a little ‘conjuring trick’ for shamelessly manipulating students (pp 9 – 10): You give them a choice for homework: they can read a long article or they can write a short essay. But you really want them to write that essay. Piece of cake – you give them a third option; writing an even longer text! Now, nobody is going to choose that, right? Yes, but because the short essay is better than the long one, students also assume it’s preferable to the article too! Brilliant!! :-)
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A Review - for Educators
By Nick Michelioudakis on 14 July 2016
MIT Professor Dan Ariely needs no introduction; he is one of the biggest names in the field of Behavioural Economics. Ariely studies the way we think, decide and operate – and in chapter after chapter he shows that we are far from being the rational creatures we think we are!By Nick Michelioudakis on 14 July 2016
In one of the amazing studies in the book he shows for instance that the way we ‘frame’ something (p. 41) often determines how others are going to take it (remember Tom Sawyer and how he got his friends to paint that wall? For classroom management purposes, this is crucial; if we introduce activities saying ‘Now, this may hurt a little...’ chances are students are going to feel the pain!)
This leads to the hugely important subject – expectations: quick Q: would you like a beer with a drop of balsamic vinegar in it? (p. 159) A: It depends on whether you know it in advance or not! If you do, chances are you are going to dislike it. Expectations colour perceptions. How many times has this prejudiced us against certain students?
Ariely’s interests range from beverages to education. Here is another Q for you: which students have better results: those who are free to choose their own deadlines, or those where the professor ‘democratically’ decides for everyone? Incredibly, it is the latter! (p. 115) This finding may go against our cherished beliefs, but in fact it ties in very smoothly with notions of ‘ego depletion’ (Baumeister). The very process of deciding exhausts us, with the result that we are both more stressed and produce poorer-quality work.
Ariely writes in the simple, effortless and straightforward style that you find among people with a real command of their subject. Rather than bombarding the reader with studies and facts, he goes through each experiment in detail, ensuring that the reader manages to grasp the key concept in all its fine details. He then goes on to consider the possible applications of the findings in various fields of life – not just work. Yet what I like best about this book is that he also uses examples from his own life – sometimes funny, sometimes poignant.
OK – now here is one last idea from the book: a little ‘conjuring trick’ for shamelessly manipulating students (pp 9 – 10): You give them a choice for homework: they can read a long article or they can write a short essay. But you really want them to write that essay. Piece of cake – you give them a third option; writing an even longer text! Now, nobody is going to choose that, right? Yes, but because the short essay is better than the long one, students also assume it’s preferable to the article too! Brilliant!! :-)
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Reviewed in the United Kingdom on 17 July 2015
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Reviewed in the United Kingdom on 14 July 2020
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