by Dan Ariely
—New York Times Book Review
“Inventive. . . . An accessible account. . . . The book has a lot to recommend it. Ariely is a more than capable storyteller, and he sticks close to his own research so his writing is full of color and detail. He also has a knack for conveying the rigor of the experiments. . . . There is a fresh insight in every chapter. I could scarcely imagine a better introduction to ‘behavioral economics,’ a discipline of growing influence that sits on the boundary between economics and psychology. . . . Ariely’s research shows that our perceptions of a good deal can be hugely influenced by marketing tricks. . . . And there is plenty there for the economic traditionalists—I am one of them—to chew on. . . . [Ariely] describe[s] with charm his relentlessly creative experiments. For anyone interested in marketing—either as a practitioner or victim—this is unmissable reading. Other readers will be engaged and looking forward to a sequel. If only more researchers could write like this, the world would be a better place.”
—Financial Times
“A spry treatise on how the world works and how we spend our money based on other people’s rules. . . . Ariely has a brilliant solution to a problem that is very real. . . . Make a point of seeing this book. That way you’ll know you want it, and you will.”
—Kirkus Reviews (starred)
“Ariely’s intelligent, exuberant style and thought-provoking arguments make for a fascinating, eye-opening read.”
—Publishers Weekly
“A taxonomy of financial folly.”
—The New Yorker
“A marvelous book that is both thought provoking and highly entertaining, ranging from the power of placebos to the pleasures of Pepsi. Ariely unmasks the subtle but powerful tricks that our minds play on us, and shows us how we can prevent being fooled.”
—Jerome Groopman, New York Times
bestselling author of How Doctors Think
“Dan Ariely is a genius at understanding human behavior: no economist does a better job of uncovering and explaining the hidden reasons for the weird ways we act, in the marketplace and out. Predictably Irrational will reshape the way you see the world, and yourself, for good.”
—James Surowiecki, author of The Wisdom of Crowds
“Predictably Irrational is a charmer—filled with clever experiments, engaging ideas, and delightful anecdotes. Dan Ariely is a wise and amusing guide to the foibles, errors, and bloopers of everyday decision-making.”
—Daniel Gilbert, Professor of Psychology,
Harvard University, and author of Stumbling on Happiness
“Predictably Irrational is going to be the most influential, talked-about book in years. It is so full of dazzling insights—and so engaging—that once I started reading I couldn’t put it down.”
—Daniel McFadden, Nobel Laureate in Economics,
E. Morris Cox Professor of Economics,
University of California, Berkeley
“The most difficult part of investing is managing your emotions. Dan explains why that is so challenging for all of us, and how recognizing your built-in biases can help you avoid common mistakes.”
—Charles Schwab,
Chairman and CEO of The Charles Schwab Corporation
“Predictably Irrational is wildly original. It shows why—much more often than we usually care to admit—humans make foolish, and sometimes disastrous, mistakes. Ariely not only gives us a great read; he also makes us much wiser.”
—George Akerlof, Nobel Laureate in Economics,
Koshland Professor of Economics,
University of California, Berkeley
“Dan Ariely’s ingenious experiments explore deeply how our economic behavior is influenced by irrational forces and social norms. In a charmingly informal style that makes it accessible to a wide audience, Predictably Irrational provides a standing criticism to the explanatory power of rational egotistic choice.”
—Kenneth Arrow, Nobel Laureate in Economics,
Joan Kenney Professor of Economics, Stanford University
“A delightfully brilliant guide to our irrationality—and how to overcome it—in the marketplace and everyplace.”
—Geoffrey Moore, author of
Crossing the Chasm and Dealing with Darwin
“Dan Ariely is one of the most original and consistently interesting social scientists I know. His research covers an unusually broad range of topics, and in every one of them he has produced some distinctive findings and ideas. His methodological inventiveness is remarkable.”
—Professor Daniel Kahneman,
Nobel Laureate in Economics, Princeton University
“Freakonomics held that people respond to incentives, perhaps in undesirable ways, but always rationally. Dan Ariely shows you how people are deeply irrational, and predictably so.”
—Chip Heath, coauthor of Made to Stick
and Professor of Organizational Behavior,
Stanford Graduate School of Business
“An exuberant book. . . . Ariely backs up each claim with examples from his own inventive research—subjects include unwitting MIT students and unsuspecting trick-or-treaters—forming an argument as charmingly anecdotal as it is convincing.”
—Seed
“Dan has an internationally recognized reputation as a top-tier scholar and researcher. His work draws together a nice synergy between psychologists and economists, philosophers and economists, theorists and practitioners, and behavioral and conventional economists. Given that Dan has spoken to all of these groups directly in his own research for years, he is the natural person to spearhead such an effort for a book.”
—Professor John List, Department of Economics,
University of Chicago
“Dan Ariely’s research covers and, in fact, creates many of the major frontiers of behavioral research on decision-making. The pleasure he gets from doing research shines through his writings, which are clever, playful, humorous, hard-hitting, insightful, and uniformly fun and exciting to read.”
—Paul Slovic, Founder and President of Decision Research
“Dan Ariely is an innovative, iconoclastic experimenter who manages to see more new things through those two i’s than almost anyone else. Ariely works at the interface of psychology, economics, and marketing, and is the only experimental scientist I can think of whose work speaks compellingly to scholars in all three disciplines. The hallmark of an Ariely experiment is that it uses an innovative experimental design to make an unusual point. His work covers a wide range of factors that affect human decision-making, from the usual suspects, inattention and confusion and myopia, to less studied issues like pain and lust.”
—Alvin Roth,
Professor of Economics and
Business Administration, Harvard University
“Dan is full of passion for life in general, which is also apparent in his writing and research. Dan’s research is very broad, covering many aspects and implications for the new field of behavioral economics. This includes the psychology of consumers, employees, and investors, crossing topics from dating to dishonesty. While he also loves the pure intellectual joy of ideas, this passion extends to his intrinsic desire to help and give his work practical meaning. The range of his expertise has been valuable in my work. The demand for his experience and the excellence of his research are also clear in the many appointments and honors he has received over these few years.”
—Admiral John Marlan Poindexter, Ph.D.
“Predictably Irrational is a scientific but imminently readable and decidedly insightful look into why we do what we do every day . . . and why, even though we ‘know better,’ we may never change.”
—Wenda Harris Millard,
President and Chief Operating Officer,
MediaLink LLC
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*As a convention in this book, every time I mention that conditions are different from each other, it is always a statistically significant difference. I refer the interested reader to the end of this book for a list of the original academic papers and additional readings.
*Now that you know this fact, and assuming that you are not married, take this into account when you search for a soul mate. Look for someone whose sibling is married to a productivity-challenged individual.
*Of course, physicians have other problems as well, including insurance forms, bureaucracy, and threats of lawsuits for malpractice.
*The price the highest bidder paid for an item was based not on his own bid, but on that of the second highest bidder. This is called a second price auction. William Vickrey received the Nobel prize in economics for demonstrating that this type of auction creates the conditions where it is in people’s best interest to bid the maximum amount they are willing to pay for each item (this is also the general logic behind the auction system on eBay).
*When I’ve tried this kind of experiment on executives and managers (at the MIT Executive Education Program), I’ve had similar success making their social security numbers influence the prices they were willing to pay for chocolates, books, and other products.
*The result was not due to wealth, taxes, or other financial reasons.
*To ensure that the bids we got were indeed the lowest prices for which the participants would listen to the annoying sounds, we used the “Becker-DeGroot-Marschak procedure.” This is an auction-like procedure, in which each of the participants bids against a price randomly drawn by a computer.
*We will return to this astute observation in the chapter on social and market norms (Chapter 4).
*I am not claiming that spending money on a wonderful cup of coffee every day, or even a few times a day, is necessarily a bad decision—I am saying only that we should question our decisions.
*We posted the prices so that they were visible only when people got close to the table. We did this because we wanted to make sure that we did not attract different types of people in the different conditions—avoiding what is called self-selection.
*For a more detailed account of how a rational consumer should make decisions in these cases, see the appendix to this chapter.
*Similar to the other experiments, when we increased the cost of both certificates by $1, making the $10 certificate cost $1 and the $20 certificate cost $8, the majority jumped for the $20 certificate.
*When it comes to credit cards, the appeal of free! is further enhanced because most of us are overoptimistic about our financial future, and overconfident about our ability to always pay our bills on time.
*This general procedure is called priming, and the unscrambling task is used to get participants to think about a particular topic—without direct instructions to do so.
*For a complete lists of the questions we asked, see the appendix to this chapter.
*These results apply most directly to sexual arousal and its influence on who we are; but we can also assume that other emotional states (anger, hunger, excitement, jealousy, and so on) work in similar ways, making us strangers to ourselves.
**I teach about 200 graduate students each year, and in early 2009 I asked for a show of hands to the question of how many students had ever used e-mail or text messaging while driving. All but three raised their hands (and one of the three who did not was visually impaired!).
**I did experience such a negative association with eggs. Soon after I was injured, the doctors fed me thirty raw eggs daily through a feeding tube. To this day, even the smell of eggs turns me off.
**The architecture department at MIT is in fact very good.
*I’m often surprised by how much people confide in me. I think it’s partly due to my scars, and to the obvious fact that I’ve been through substantial trauma. On the other hand, what I would like to believe is that people simply recognize my unique insight into the human psyche, and thus seek my advice. Either way, I learn a lot from the stories people share with me.
*Matrimony is a social device that would seem to force individuals to shut down their alternative options, but, as we know, it too doesn’t always work.
*The French logician and philosopher Jean Buridan’s commentaries on Aristotle’s theory of action were the impetus of this story, known as “Buridan’s ass.”
*We were also hoping to measure the amount of vinegar students added to the beer. But everyone who added vinegar added the exact amount specified in the recipe.
*There is a nice T-shirt on sale at the MIT bookstore that reads “Harvard: Because not everyone can get into MIT.”
**In fact, goose liver pâté is basically equal parts goose liver and butter, with some wine and spices.
*The music included Bach’s “Chaconne,” Franz Schubert’s “Ave Maria,” Manuel Ponce’s “Estrellita,” a piece by Jules Massenet, a Bach gavotte, and a reprise of “Chaconne.”
*We do understand quite precisely how a placebo works in the domain of pain, and this is why we selected the painkiller as our object of investigation. But other placebo effects are not as well understood.
**I suspect that Airborne incorporates many elements to maximize the placebo effect (bubbles, foaming, medicinal color, exaggerated claims, and so on) and, as a consequence, had a real beneficial impact on my immune system and my ability to fight off illnesses. Placebos are all about self-fulfilling prophecies, and Airborne is one of the best.
*As claimed by the Harvard Business School.
*We often conduct our experiments at Harvard, not because we think its students are different from MIT’s students, but because it has wonderful facilities and the faculty members are very generous in letting us use them.
*The distribution of the number of correctly solved questions remained the same across all four conditions, but with a mean shift when the participants could cheat.
*Do you know the Ten Commandments? If you’d like to test yourself, write them down and compare your list with the list at the end of this chapter. To be sure you have them right, don’t just say them to yourself; write them down.
*Can the Ten Commandments raise one’s math scores? We used the same two memory tasks with the control conditio
n to test that premise. The performance in the control condition was the same regardless of the type of memory task. So the Commandments do not raise math scores.
*Theoretically, it is possible that some people solved all the problems. But since no one in the control conditions solved more than 10 problems, the likelihood that four of our participants truly solved 20 is very, very low. For this reason we assumed that they cheated.
*Independent of your opinion about the effect (or lack thereof) of carbon emissions, for the sake of this illustration, let’s assume that we want to limit it.
