Saturday, January 14, 2012

Predictably Irrational: Chapter 13

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.

Apparently, we like to demonstrate our uniqueness. For example, if someone orders a drink ahead of us at a restaurant/bar, we are less likely to order that same drink. When we change our drink choice based on what the person before us ordered, we are also less likely to enjoy our drink, because it was not our first choice. Ariely determined this through experiment.

In this the final chapter of the book, Ariely concludes that it is clear that we do not behave rationally in a slew of different ways. Furthermore, as he demonstrated in the book, our irrational behaviours are not random. Instead, they are systematic and predictable.

As such, we can take steps to rectify our otherwise impending missteps. Ariely argues that economics should be based on how people actually behave, not how they should behave.

1 comment:

juan said...

Dan Ariely is teaching a free online course through Coursera on this subject. It's called "A Beginner's Gide to Irrational Behavior", and it starts in a few days.
Those interested can enroll here: https://class.coursera.org/behavioralecon-001/auth/welcome?type=logout&visiting=https%3A%2F%2Fclass.coursera.org%2Fbehavioralecon-001%2Fclass%2Findex

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