Dan Ariely's Predictably Irrational

For decades, people believe that our economic system is operated by statistics, followed by a series of numbers and calculations. Economists gather price information, evaluate advantages and disadvantages, and find the best solution to outpace competitors. They believe people usually behave rationally. However, as the concept of behavioral psychology emerged in the economic world, economy has been viewed in a different perspective. Behavioral economists speculate that people are irrational reactors instead of rational actors. One of the supporters of this concept, Dan Ariely, the Professor of Psychology and Behavioral Economics at Duke University put his twenty years of findings and research into his book- Predictably Irrational and attempts

The author and his colleagues carried out a series of experiments to illustrate how we have little control over our irrational behaviors and how this impacts our ability to make decisions. Ariely combines psychology and economics to show us why vigilant people make poor decisions about sex when aroused, why people tend to keep their options open and struggle to commit themselves to one thing, and why everyone enjoys comparison, but also make us miserable at the same time because of jealousy and envy. According to Ariely, our understanding of economics should be built on our systematic, unsurprising irrationality, instead of assumptions of a rational subject. Ariely believes that if we have a better perception of the forces (emotions, relativity, and social norms), which we often ignored or misunderstood can influence our economic behavior and even open up opportunities to reexamine individual motivation and consumer choice, as well as economic and educational

After the experiment is done, he then goes deeper into applying the thesis into real world experience. For example, in the chapter of “the cost of social norms”, the author and his research team conducted an experiment by giving participants an easy task to complete, which is drag as many circles as they could within five minutes. They divided participants into three groups: one were given 5 dollars, one were given 50 cents, and one were given nothing to whom they introduced the tasks as a social request. The results turned out that the group which was offered nothing performed the best, which indicates that “people will work more for a cause (social norm) than for cash (market norm).” (Ariely, 2008, p.79) Ariely then conveys this idea into real world experience by pointing out how companies use social norms such as healthcare benefits and annual rewards in the corporations to strongly motivate employees’ behavior. By implementing the experiment into real world experience, it makes the reader realize how social norm affect our actions and decisions on a daily basis. Most of these experiments are explicitly designed, and are usually backed up and supported with detailed examples and illustrations, which give readers a better understanding and an