Sunday, May 12, 2013
Predictably (and amusingly so) Irrational
I swear I read Freakonomics. But ask me now what chapter I found
most interesting and the only response I can give you is a guilty smirk. It was
amusing- the relationships, the variables, the way factors are interconnected-
but it was simply not my cup of tea.
However, I haven’t given up on Economics just yet.
Predictably Irrational is a compilation of research
experiments that tackle Economics. The difference between this and
Freakonomics? Predictably Irrational explores the world of Behavioral
Economics.
“Behavioral Economics
is a relatively new field, one that draws aspects of both psychology and
economics. It’s not just the behavior that I aim to understand, but the
decision-making process behind such behavior”. –Dan Ariely, Author
Using my own words, this book helped me understand why we
all want to be honest, happy and content individuals but find it challenging to
be so. Is it the environment? Is it pressure from other people? Through simple
yet structured experiments, this book somehow managed to dig into the bottom of
things: we are the very people who sabotage our own happiness, and we do it not
only by being irrational, but by being predictably so.
If there is a substantial amount of curiosity you’ve
developed by now that may urge you to get a copy of this book, stop right here.
I don’t want to spoil it for you. If not, read on and appreciate a handful of
my favorite insights:
- Most people don’t know what they want unless they see it in context. We don’t know what kind of racing bike we want – until we see a champ at Tour de France ratcheting the gears of a particular model… We don’t even know what we want do with our lives- until we find a friend or a relative who is doing just what we think we should be doing. Everything is relative, and that’s the point. Like an airplane pilot landing in the dark, we want runway lights on either side of us, guiding us to the place where we can touch down our wheels.
- “I don’t want to live the life of a Porsche Boxster”, said the owner after selling it, “because when you get a Boxster you wish you had a 911, and you know what people who have 911s wish they had? They wish they had a Ferrari”. The lesson we can learn: the more we have, the more we want.
- Tom (Sawyer) had discovered a great law of human action, namely, that in order to make a man covet a thing, it is only necessary to make the thing difficult to attain. - Make Twain
- Zero is not just another price, it turns out. Zero is an emotional hot button- a source of irrational excitement.
- Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but more effective as well.
- In a modern democracy, people are beset not by a lack of opportunity but by a dizzying abundance of it. We are continually reminded that we can do anything and be anything we want to be. The problem is living up to this dream. We must develop ourselves in every way possible; must taste every aspect of life; make sure that of the 1,000 things to see before dying, we have not stopped at number 999. But there comes a problem- are we spreading ourselves too thin?
- Ownership is not limited to material things. It can also apply to points of view. Once we take ownership of an idea- whether it’s politics or sports- what do we do? We love it perhaps more than we should. We price it more than it’s worth. And most frequently, we have trouble letting it go because we can’t stand the idea of its loss. What are we left with then? An ideology- rigid and unyielding.
- “If a tree falls in the forest, and no one is around to hear it, does it make a sound?”
- The danger in expecting nothing is that, in the end, it might be all we’ll get.
- Since people engage in a cost-benefit analysis with regard to honesty, they can also engage in a cost-benefit analysis to be dishonest. According to this perspective, individuals are only honest up to the point that suits them.
- We have doors- rigid and big ones- which we all ought to shut.
And lastly, even though I get to appreciate Economics
more through this book, I’m still a hopeless romantic. Isn’t this one of the simplest,
yet sweetest dedications, ever??? J
- · Finally, thanks to my lovely wife, Sumi, who has listened to my research stories over and over and over and over. And while I hope you agree that they are somewhat amusing for the first few reads, her patience and willingness to repeatedly lend me her ears merits sainthood. Sumi, tonight I will be home at 7:15 at the latest; make it 8:00; maybe 8:30, I promise.
# posted by Liana : 8:03 AM
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