Book Review: Predictably Irrational by Dan Ariely

by erratio 8y8th May 20119 comments

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I'm ambivalent about recommending this book to LW readers. On the one hand, it's well-written and has lots of interesting anecdotes about Ariely's experiments. He also includes a full reference list at the end of all the papers published based on the studies he describes in the book, which is nice. On the other hand, almost none of the material should be really new to most people here, and a lot of the chapters turned out to be summarisable in a single sentence, indicating a large amount of fluff.

Anyway, I spent a couple of hours today writing up a quick summary of each chapter, and have included my notes below.

Chapter 1 - Everything is relative

When presented with multiple options, some of which are similar to each other and some of which are in separate reference classes, people will consistently pick the best option from the set of similar options because they are directly comparable. Similarly, the use of decoy options when offering products will influence their choices - including a ludicrously expensive option makes the others look good by comparison, and when offering three choices in the same reference class the majority of consumers will pick the middle one.

Chapter 2 - Supply and demand:

Examines the anchoring effect. People asked to list the last two digits of their Social Security number unconsciously used that number as an anchor when bidding for various items later. Black pearls went from worthless to priceless after being displayed next to other high-priced gemstones. When sequentially given 3 different anchoring points, people stuck to the first one presented even if the later ones would have been more beneficial for them. It is also possible to self-anchor, ie. if I buy something expensive despite a previous habit of being cheap, I am now more likely to buy something expensive again because I use my own novel behaviour as an anchor.

Chapter 3 - The power of FREE!

People are irrationally attached to getting free stuff. In one experiment, he set up a table where they had high-quality chocolate for 15c and low-quality for 1c, and most people chose the high-quality ones. But when they decreased each price by 1c, so that it was 14c versus free, most people chose the free ones (and in another experiment they controlled for the inconvenience of getting money out for one but not the other and got the same result). People will also buy more books in order to get free shipping, buy food with zero sugar over food with a negligible amount of sugar, buy the wrong car for their needs because it comes with free oil changes, and so on.

Chapter 4 - The cost of social norms

People don’t like comparing social value and market value directly and mixing the two has negative social consequences, as the social norms dissolve permanently as soon as market norms are introduced. People were asked to perform a task either for a low payoff, high payoff, or as a favour. People doing the task as a favour performed around the same level as the high-payoff group. Gifts with explicit monetary values are treated as though they are money, whereas gifts without an explicit value attached are treated as social currency. Ariely suggests that we should try to create more social norms rather than focussing on numerical measures such as money and grades.

Chapter 5 - The influence of arousal

Students were asked to imagine that they were aroused and answer various questions about his sexual preferences, moral behaviours with respect to sex, and likelihood of engaging unsafe sex as though they were aroused. They were then asked to answer a similar set of questions while actually aroused. The results showed that people are terrible at predicting how their preferences will change under the influence of emotion - they were much more likely to engage in immoral or unsafe behaviour and to find various fetishes exciting while aroused than they had predicted.

Chapter 6 - Procrastination and self-control

Students in Ariely’s classes performed better when given deadlines spaced throughout the term than when the only deadline was the last day of term for all three assignments they had to write. Ariely advises measures such as precommitting to dates with penalties in grades or money for not meeting them, making tasks as simple as possible to reduce confusion-driven procrastination (ie. remove trivial inconveniences), and to blog or otherwise publicise the things you need to do so as to make yourself feel accountable.

Chapter 7 - The high price of ownership

People systematically overvalue what they own, for example students who won a lottery for tickets to a big basketball game asked for an average of $2400 for their tickets, while students who lost the lottery were willing to offer an average of $175 to buy one. People are highly loss-aversive.

Chapter 8 - Why options are distracting

People are terrible at dealing with opportunity costs; even when given the expected values for each option available they will still try to experience all options ‘just in case’. Conversely, when an opportunity cost isn’t obvious, people will often neglect options that they should be paying attention to, eg. parents missing time with their young children because the opportunity of experiencing their childhoods isn’t salient enough. Ariely suggests we should drop as many options as we can, because they drain our energy and commitment from the options that we’ve decided to pursue. People are also bad at taking into account the consequences of indecision, Ariely recounts a friend who wasted three months trying to decide between two nearly identical digital cameras when he should have just picked one and then taken lots of cool photos during those three months.

Chapter 9 - The effect of expectations

Peoples expectations affect their perception. eg. people seeing condiments in fancy containers were more likely to enjoy their coffee, people supporting opposite sports teams will have different opinions about contentious plays, and so forth. People’s behaviour can be influenced by stereotypes, even when the stereotype isn’t directly about them (students primed with words related to old people walked down the hallway slowly compared to the control group) but especially strongly when it is about them (asian women performed better or worse than average on maths tests depended on whether they were reminded of their Asian-ness or female-ness).

Chapter 10 - The power of price

The placebo effect is influenced by price, such that almost all participants given a fake painkiller supposedly costing $2.50 per pill reported pain relief, while only half the participants reported pain relief from a 10c pill. The effect was particularly strong for people with chronic pain (ie. who cared the most about whether the pills were effective or not)

Chapter 11 - The context of our character part I

If you provide people with an opportunity to cheat and not get caught, they will, but only up to a certain point. Providing more temptation after that point has no further effect on behaviour. When people are asked to read an honour pledge or the Ten Commandments, they will act more honestly for a short time afterwards even in the absence of visible accountability.

Chapter 12 - The context of our character part II

When Ariely left Cokes in dorm fridges, they disappeared within 72 hours. When he did the same thing with $1 bills, no one touched them, because people take money more seriously. When monetary rewards in a test were replaced with tokens that were redeemed a few seconds later for cash, students given an opportunity to cheat cheated around twice as much as students given the opportunity to cheat but given their money directly. Lots of further anecdotes about how the further removed the money is from a process, the easier it is to justify dishonesty.

Chapter 13 - Beer and free lunches

People use public ordering as an opportunity to signal uniqueness or conformity, even if this means ordering a dish or drink that they don’t actually want.

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