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Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions |  | Author: Dan Ariely
Publisher: Harper
Category: Book
List Price: $27.99
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Rating:  72 reviews
Media: Roughcut
Edition: Rev Exp
Pages: 400
Number Of Items: 1
Shipping Weight (lbs): 1.5
Dimensions (in): 9.1 x 6.4 x 1.2
ISBN: 0061854549
Dewey Decimal Number: 153.83
EAN: 9780061854545
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Product Description
How do we think about money?
What caused bankers to lose sight of the economy?
What caused individuals to take on mortgages that were not within their means?
What irrational forces guided our decisions?
And how can we recover from an economic crisis? In this revised and expanded edition of the New York Times and Wall Street Journal bestseller Predictably Irrational, Duke University's behavioral economist Dan Ariely explores the hidden forces that shape our decisions, including some of the causes responsible for the current economic crisis. Bringing a much-needed dose of sophisticated psychological study to the realm of public policy, Ariely offers his own insights into the irrationalities of everyday life, the decisions that led us to the financial meltdown of 2008, and the general ways we get ourselves into trouble. Blending common experiences and clever experiments with groundbreaking analysis, Ariely demonstrates how expectations, emotions, social norms, and other invisible, seemingly illogical forces skew our reasoning abilities. As he explains, our reliance on standard economic theory to design personal, national, and global policies may, in fact, be dangerous. The mistakes that we make as individuals and institutions are not random, and they can aggregate in the market—with devastating results. In light of our current economic crisis, the consequences of these systematic and predictable mistakes have never been clearer. Packed with new studies and thought-provoking responses to readers' questions and comments, this revised and expanded edition of Predictably Irrational will change the way we interact with the world—from the small decisions we make in our own lives to the individual and collective choices that shape our economy.
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| Customer Reviews:
Showing reviews 1-5 of 72
 Made me think through some things I'd overlooked about market behavior June 27, 2009
Drifty (Southwest and Southeast USA)
91 out of 96 found this review helpful
I have been thinking about economics seriously for nearly 30 years. Classical economics is built to no small degree on the notion that people will generally act in their own best self interest, after rationally and intelligently examining their options. This fit my world view fine in my first career as an engineer (BS and MS in Electrical Engineering).
From my 2nd Career as a Business Development person (MBA), I began to have to deal with people's tendency to not entirely think things through.
Here in this book, we have a professor who runs socioeconomic tests on his MBA students. These students are smart enough, worldly enough, experienced enough, and educated enough to approximate the standard economic assumptions and produce reasonably rational behavior.
Guess what. Even among broad experiments conducted on multiple MBA classes over time, one can predictably pre-bias the outcome of a particular run of a socioeconomic experiment by what seeds you plant in the class members' minds before the experiment. For example, in one experiment in estimating prices, the author requires his students to write the last two digits of their social security numbers on the top of the paper. Simply the act of writing a high number (e.g., 88) versus a low number (e.g., 08) produced statistically significant correlatable influences on the students' later price estimates. Those compelled to write "88" at the top of their papers would reliably estimate higher prices than those compelled to write "08" at the top of their papers, to a statistically significant degree.
Extrapolating to "real life." Watching Fox News will tend to make you more conservative without you knowing it. Watching MSNBC news will tend to make you more liberal without you knowing it.
If you want to understand "real truth," you are just going to have to do a little more than self-select your news feeds. You are going to have to seriously consider a diversity of viewpoints.
Moreover, if you have Social Darwinist beliefs as I once did, you may need to re-think the concept of the Poverty Trap. Early pre-conditioning really does make a difference.
Here is the way I think of it as an Engineer. Classical Economic Theory is analogous to Classical Newtonian Physics. There is nothing badly wrong with it, and it is a good approximation for most real world problems at the middle of the distribution.
However, General Relativity is indeed more correct that Classical Newtonian Physics, and the additional knowledge makes a real difference in certain special cases. And, those special cases are sometimes the really important ones. Likewise, Behavioral Economics is adding something very valuable to our knowledge of Classical Economics.
Read this only if you are brave enough to contemplate that the world might be a little more complex than we wish it were.
An excellent book which provides valuable insights May 20, 2009
Irfan A. Alvi (Towson, MD USA)
38 out of 45 found this review helpful
This book and Dan Ariely have recieved a lot of media attention, so I approached the book with some skepticism, thinking that it might be overhyped. I'm pleased to report that my skepticism turned out to be unwarranted.
The book has many strengths, the main one being that it convincingly presents many ways people are wired and/or conditioned to be irrational, usually without even being aware of it. This eye-opening revelation can be a bit disheartening, but the good news is that we can fix at least some of this irrationality by being aware of how it can arise and then making a steady effort to override it or compensate for it. That's not an easy task, but it can be done. As a simple example, I've programmed a realistic exercise schedule into my PDA, and I've been very consistent with my exercise because of that. The PDA imposes a discipline on me which I couldn't otherwise impose on myself (as I know from experience).
The book is also well written, and I would even say enjoyable to read. The many experiments described in the book are presented in a lively way which elicits interest, and Ariely goes into just the right amount of detail -- enough to convey the basic experimental designs, results, and plausible interpretations, without boring the reader by getting into esoteric points which are more appropriate for journal papers.
The one criticism I have of the book, which applies to most of Western pscyhology, is that most of the described experiments used US college students as subjects. That raises a serious question regarding the extent to which the results can be generalized to people of the same age who aren't college students, people of other ages, and people outside the US. Study of cultural psychology reveals that differences due to these factors can be profound, and Ariely himself notes a Korean study where such differences were observed, but he doesn't really elaborate on the point.
Despite this one criticism, I think this is an excellent and authoritative book, and among the better ones in the "why smart people do dumb things" genre, so I highly recommend it. The insights revealed are both fascinating and practical, if you can muster the discipline to apply them.
Brilliant look into behavioral economics September 20, 2009
J. Seidman (Illinois, USA)
5 out of 5 found this review helpful
I enjoyed this book in much the same way I enjoyed Freakonomics. Whereas Freakonomics explores real-life examples of economics, Ariely's book discusses experiments that demonstrate principles of behavioral economics.
Ariely shows through a series of experiments that people are not the rational consumers of legend. People predictably overvalue things they already own, go after free things even if there's a better deal available, and do many other things that don't make sense. People's reactions are consistent, thus predictable, even if they're not optimal from a pure economic viewpoint - hence the title of "Predictably Irrational."
Throughout the book, Ariely discusses how the failure of many economists to consider behavioral economics has led companies and governments to bad decisions. Policies that seem appropriate if everyone were to make emotionless decisions fall apart when you consider that people are, well, human.
In Ariely's acknowledgments, he lists several people who helped him figure out how to write in "non-academese." Having read many books written by professors, I'd say he received excellent assistance in this area. His writing style is engaging and easy to follow.
This was one of the best books I read this year.
This was really an eye-opener August 15, 2009
Mariusz Skonieczny (ClassicValueInvestors . com)
3 out of 3 found this review helpful
We like to believe that we are rational. Many investment philosophies are based on efficient market theory, which assumes that market participants are well-informed and act rationally. I always found efficient market theory to be flawed, because when I looked at individual investors, I would get surprised more and more every day by how irrational their behavior was. So how it is possible for markets to be efficient, when most investors I know are completely irrational? Well, this book has some really good explanations.
The author of this book shows us that even though we believe that we act in a rational way, in reality we act in predictably irrational way. As a result of this irrationality, we frequently make poor decisions with our money, life partners, and health. For example, we tend to overvalue things that we own. We might be made to believe that something works even when it doesn't. A placebo is perfect example.
This book was really an eye-opening experience. We all do the things the author talks about. As I read this book, I kept catching myself and saying, "Yes, I did this, too." I enjoyed reading this book, and I would recommend it.
- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
Phenomenal Book September 29, 2009
Michael
2 out of 2 found this review helpful
Probably the best book I've read yet on behavioral economics. Each chapter is well organized around a specific topic and incredibly thought provoking. I highly recommend it.
Showing reviews 1-5 of 72
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