Predictably Irrational

This was a fascinating introduction for me to Behavioral Economics. The author conducts several easy to understand experiments to explore some of the less explainable sides of Economic Theory. The author refers to his explanation of difficult to explain data as "irrational". His word usage has irritated subscribers of conventional Economic theory. The traditional explanation of Economic behavior suggests that all decisions are calculated rationally. The unpredictability of rational preferences has more to do with unstated beliefs than from being "irrational".

The argument that Ariely wants to make is that not all economic behavior is rational. Sometimes, he argues, that we humans are irrational. His conclusions are that our irrational behavior is systematic and predictable. Since, our irrational behavior is predictable, then we can take steps individually and as a society to curb our irrational decisions so that we get our rational desired outcome. This conclusion is optimistic and seems to be hiding an agenda one step removed from the Nanny State.

For Example: In one study of cheating he showed how contextualizing a morality made all the difference in whether participants cheated or remained honest. They showed this by having participants recall as many of the Ten Commandments prior to the test. (Later, they used an agreement that participants sign stating that they agreed to following the MIT Honor Code). When the ethical context was part of the participant's experience with the test, they, would not cheat. However, when they removed the test from any such reminders and made it easy to cheat, then, participants only cheated a little. Finally, when they removed the reward of cheating from an obvious reward (like a token that could be exchanged for the monetary reward) cheating became rampant.