Predictably Irrational
I saw this “behavioral economist,” Dan Ariely, last night give a talk, (sounding remarkably like Doctor Tony from the Simpsons), about his new book, Predictably Irrational in which he discusses the ways in which human beings can’t help but make less than ideal choices, depending on how information is presented to us and processed by our tiny little minds.
So, for instance, one of the strange things we do is make relative evaluations based on having previously made, for no apparent reason, absolute evaluations; we then “anchor” subsequent evaluations to them, even though the original evaluation was essentially arbitrary.
His example was how people have come not to flinch at paying four bucks for a Grande Latte at Starbucks because that’s way cheaper than a Vente, even though the original decision to pay three times as much for what we used to spend on a small coffee came essentially out of nowhere. But once we’ve made the decision the first time, we reinforce it by doing it again and then, just like we go to restaurants where there are lots of people, we keep queuing up behind ourselves to make the same original mistake over and over.
Another striking example was that if you give two groups of people a different anchor, their judgments about quite important things can change. So, for instance, tell one group to write down three things they love about their significant others, and tell another to write down ten things they love about them. Then ask both groups to talk about how happy they are with their partners and whether they think they’ll still be together in 10 years; the group who only wrote three will be way more likely to answer positively; those asked to come up with 10 found it difficult and so come to think they don’t really love their partners all that much.
It’s like at 327 words, I’m brilliant; any more, and I am, predictably, irrational.
So, for instance, one of the strange things we do is make relative evaluations based on having previously made, for no apparent reason, absolute evaluations; we then “anchor” subsequent evaluations to them, even though the original evaluation was essentially arbitrary.
His example was how people have come not to flinch at paying four bucks for a Grande Latte at Starbucks because that’s way cheaper than a Vente, even though the original decision to pay three times as much for what we used to spend on a small coffee came essentially out of nowhere. But once we’ve made the decision the first time, we reinforce it by doing it again and then, just like we go to restaurants where there are lots of people, we keep queuing up behind ourselves to make the same original mistake over and over.
Another striking example was that if you give two groups of people a different anchor, their judgments about quite important things can change. So, for instance, tell one group to write down three things they love about their significant others, and tell another to write down ten things they love about them. Then ask both groups to talk about how happy they are with their partners and whether they think they’ll still be together in 10 years; the group who only wrote three will be way more likely to answer positively; those asked to come up with 10 found it difficult and so come to think they don’t really love their partners all that much.
It’s like at 327 words, I’m brilliant; any more, and I am, predictably, irrational.
posted by Professor Dave at 9:21 PM
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