Dan Ariely is the Alfred P. Sloan Proffesor of Behavioural Economics at MIT, where he holds a joint appointment between MIT’s Media Laboratory and the Sloan School of Management. He is also a researcher at the Federal Reserve Bank of Boston and a visiting professor at Duke University. Ariely wrote this book while he was a fellow at the Institute for Advanced Study at Princeton.
”Predictably Irrational” is a book that discussed the idea of rationality, and it is a concise summary of many situations and way of thinkings that may affect our decisions. The book is set up in an easy to understand manner where each chapter gives us numerous examples about the simple, day-to-day decisions that shape our lives and pointed out how much of our "rational" decisions are actually irrational. Traditional economics assumes that every person makes decisions rationally, meaning we weigh all our options and choose what will logically be best for us. Based on interesting experiments, Ariely shows us that we are actually not as rational as the economics has always assumed. He thinks people act irrationally all the time but predictably so.
In this book, Ariely demonstrates how "decoys" are used by merchants to confuse us about our choices by manipulating consumers to purchase something they don't want. In a chapter on “relativity,” for example, Ariely writes that evaluating two choices yields different results than evaluating three - A, B and a somewhat less appealing version of A. Thus, given three choices, A, B (very distinct, but equally as attractive as A), and A- (similar to A, but inferior), we will almost always choose A, because it is clearly superior to A-. In this chapter, Ariely pointed out that, in the presence of two equal options, we couldn't decide between the two, and the presence of a third, inferior option, which is irrational behaviour and it shouldn't cause us to suddenly prefer one of the two. The cure to this according to Ariely is to break the cycle so that we can control what goes on around us.
Other points being discussed by Ariely are about why ”FREE!” is not always a good deal, why we pay too much for things, why keeping our options open is a total waste, and why we value the things we own far beyond what they are actually worth and so on. Ariely also speaks about social norms and market norms, where he viewed ”life with fewer market norms and more social norms would be more satisfying, creative, fulfilling and fun”. 2
He also stated that under the influence of arousal the potential to for us make irrational decisions is higher. Our behavior is fully controlled by emotions. Therefore, Ariely suggested that it is important for us to look at different emotional state and understand it fully before we can make a decision.
Other than this, Ariely pinpoint why we can't make ourselves do what we want to do. According to Ariely, more often than not, people set their goals but end up proscratinating, that is, giving up on their long term goals for immediate gratifications. However, with proper motivations such as deadlines and penalties, people are more willing to meet those deadlines or long term goals. People would also be more likely to meet their deadlines and long term goals if more consequences were put into effect.
Clearly, this is a book which really bends the mind. It provides us with a perceptive understanding and a clear explanation of what influences each of us.
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