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Predictably Irrational Decision-Making

Thursday, February 28, 2008

Humans often act in irrational ways...for example, making poor decisions about dating, and spending money unwisely. Recent experiments reveal our irrational behavior can be quite predictable! MIT professor Dan Ariely explains the forces that lead to irrational behavior in his new book Predictably Irrational.

Weigh in: What's the most irrational decision you've ever made? And do you know why you made it?

Guests:

Dan Ariely

The Morning Brief

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Comments [9]

Jean Bae from Portland, OR

We shouldn't make race or gender a deciding force, but regardless of whether these things utlimately matter in how a president will govern, it is a large decision motivation. This is the nature of irriational judgement. To be objective, what we should first ask (instead of assume off the bat) is whether these "cards" will affect the way they think, govern, and thus how they will move this country.

As for me...I want transparency; Less calculated, manufactured and pacifying speeches/intentions but rather ones with real insirpation (which I consider the fuel for sincere actions) and above all the best stab at truth. Although reality differs between people and places, we should look at things from the highest possible vantage point, with an absolute respect to long-term utilitarianism. Let's try asking who has what is necessary to take civilization in the best direction for (1) survival and (2) elevation within a short-term time. Or, who will degernate us the least?

As for HIllary being a woman, I think this will not equate to the "woman's touch" type of mystique and perspective her supporters are alluding to. This is a woman who can not fully concede to a cause greater than herself; just look at her history! Why should "experience" be valued when it is synonymous with the dysfunctional politics of the past?

The difference I, as a longtime cynic, do believe Obama has what it takes to move this country towards the positive...towards progress and not regress.

Mar. 06 2008 11:15 AM
K. Rathbone from NJ

As a behavioral economist, you said the nurses performed removing your bandages in a way that was to their mind, the best way. They ripped off the bandages quickly, but your research found doing it slower over a longer period was proven better for the comfort of the patients. I wonder if your research investigated the underlying reasons (why) for the nurses' haste in the procedure. My thought [as a social worker] would be, not only are they attempting to shorten the duration (not intensity) of pain for the patients, but more importantly, for the nurses to experience a shorter duration (thus lesser intensity) of pain by inflicting this procedure onto their patients. The quicker the procedure goes for the nurses, the quicker they can return to not feeling empathetic pain. By drawing out the procedure, (lessening the pain for the patient), this increases and makes greater the length of pain for the nurse.

Mar. 01 2008 11:41 AM
Prof. Harry Bernstein

A must listen for my Marketing students we will discuss the show in todays class. It tied into todays lecture on pricing polices. The show opened up a new insight into an old question---Bravo---Keep on stimulating the minds of your listeners with such great guests--

Feb. 29 2008 07:13 AM
Stephen Bloch from Garden City

BTW, I highly recommend this book to anybody who liked "Stumbling on Happiness" (and vice versa): both books show consistent, predictable patterns of human behavior that lead us to make bad decisions, and how we can consciously avoid those mistakes.

Feb. 28 2008 01:10 PM
Bob from NYC

The Profs. conclusions are anecdotal at best! If his conclusion was correct nobody would shop for food at walmart and we know that they do in great numbers. All economic theory is based on the fact that economic decissions are made in a ractional way. Once you change the attributes of choice you add a perceived value to one of the products and ruin your test!

Feb. 28 2008 01:10 PM
Stephen Bloch from Garden City

One of my favorite bits of the book is the chapter about the "decoy effect". Suppose you're comparing 3 choices: X, Y, and X'. X' is similar to X, but clearly worse, so you won't actually choose X'... but it makes X look "good" by comparison, so you tend to choose X over Y, regardless of whether X is actually better than Y.

The same can happen if X' is clearly BETTER than X, but isn't actually available. The comparison with X' makes X look "bad", so you'll tend to choose Y over X because of the presence of a third "option" that isn't really an option.

For example, suppose you walk into a restaurant, and the only thing to eat is an uninspiring hamburger for $20; you'd probably leave and look for dinner somewhere else. But if you had paid a $10 cover charge to get into the restaurant, and THEN found that the only thing to eat was the same hamburger for $20, you might buy it rather than going somewhere else and "wasting" the $10. X is leaving to get dinner elsewhere; Y is buying the hamburger for $20; and X' is the (unavailable) option of going back in time, not paying the $10 cover charge, and just getting dinner somewhere else. X is clearly worse than X', so it looks "bad", and you'll tend to go for Y, even though you would actually do better getting dinner somewhere else.

Exercise: apply this reasoning to the Iraq War. (Hint: both "stay the course" and "get out now" partisans can use this reasoning against one another.)

Feb. 28 2008 01:04 PM
ericf from jersey city

thanx for a timely, interesting segment.

all quite fascinating and quite reasonable sounding, but i've yet to hear very much that flies in the face of text book economics.

my guess here is that most of the public discusion of economics is based on a very narrow subset of the discipline (which tends to exclude even much of the work of adam smith).

for example, the concept of "snob appeal", ie that a higher price can sometimes be an incentive to buy rather than a disincentive, is taught in introductory microeconomics classes. the effects of non-monitary costs and benefits (time, prestige, air quality, etc) and ways of including them in economic analysis are also discussed.

and then there's game theory, which has influenced economic thinking for over half a century.

there are politicians, pundits, and public intellectuals who use bits of ecomic theory to justify their views in much the same way some on the religious right make very selective use of bits of the bible. the problems here are not with economics or the bible, but with how some people try to exploit them.

i completely agree that over-applying such a narrow set of ideas and basing public policy on them is potentially toxic. broadening the discussion may be part of the antidote (and this segment is a good start).

presenting a broader view of economic thinking might make a good "please explain" segment.

Feb. 28 2008 12:57 PM
Amy from Manhattan

I don't like beer--maybe I should try adding vinegar! Who says it *has* to be balsamic? Of course, you don't often find vinegar in the same places people go to drink beer, so this might not work so well in a social context.

Feb. 28 2008 12:32 PM
Eric Mintz from Reading, England

Could you please ask your guest to comment about Linux and the rest of the Open Source software movement?

Thanks for a most interesting segment.

Feb. 28 2008 12:25 PM

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