If you have studied Economics, you will realise Economics is everywhere. From countries to smaller units of business, every basic unit that runs on money follows the basic principle of Economics. One of the biggest assumptions that Economics follows is that consumers (or humans) are rational i.e. they use logic and sense before any decision.
But what if humans are rational and irrational at the same time? The book Predictably Irrational by Dan Ariely is based on the Irrationality of Humans. The book is based on a branch of Economics called Behavioural Economics which deals with elements of Economics and Psychology to understand how and why people behave the way they do in the real world.
Professor Dan Ariely is an Israeli-American professor and author and serves as a James B. Duke Professor of Psychology and Behavioural Economics at Duke University. According to Prof. Dan Ariely and other great Economists, humans make mistakes and those mistakes are systematic. Then why not make better strategies, tools and methods to improve the efficiency of humans into micro as well as micro environment?
Important Points of Discussion of Predictably Irrational
Prof. Dan Ariely has collaborated with number of Economists and conducted several experiments before being ‘Irrational’ on some of the least discussed topics which perfectly makes sense in the modern world.
Important questions have been answered in those 15 chapters of the book, some of them are –
- Why is everything relative even when it is not supposed to be?
- Why the price of pearls and everything else Is up in the air?
- Why do we often pay too much when we pay nothing?
- Why are we happy to do things but not happy when we are paid to do things?
- How free can make us less selfish?
- Why hot is much hotter than we realise?
- Why do we overvalue what we have?
- Why options distract us from the main objective?
- Why the mind gets what is expects?
- Why a 50-Cent Aspirin Can Do What a Penny Aspirin Can’t?
- Why we leave the last piece of food in plate when we are sitting in a group?
Everyone must be wondering whether these questions are that important or not in our daily lives or not but yes, they are. All these questions directly or indirectly affect our daily lives and how we spend our money!
Message of Predictably Irrational
As a child, Dan Ariely had received 3rd degree burns on his body and face, his body was 70% burned and had to remain in hospital for months and go to daily checkups for surgeries and treatment. While he was in the hospital, he saw the nurses; when they had to clean the wound, they used to remove the bandages and ultimately finish off the process is quick time duration. He had realised that patients tend to feel more pain when the process is done in such haste.
When he asked the nurses as to why they do it in such haste, they told him that this is how they usually do but it is not because they feel it is the best method, it is because the nurses too feel anxious and pain when they hear and see the patients in agony.
That was when he realised that even though nurses had to be rational and softer and nicer to the patients, they altogether had a different way of treating patients. That was very irrational, yet effective for nurses.
In the same way, the book Predictably Irrational finds hidden forces that shape our decisions. The book examines irrationality from various viewpoints like market elements, human connections and government strategy, yet the ramifications might be legitimate in any field that includes human independent direction.
Key Takeaways of Predictably Irrational
- Social and market norms are two different entities. They work separately and do not mix well.
- People like to steal goods, products but will hesitate stealing money.
- When there are too many options, people tend to lose more money than they were pre-destined.
- The link between amount of salary and happiness is not as strong as one would expect it to be.
- Countries with the “happiest” people are not among those with the highest personal income. Yet we keep pushing toward a higher salary.
- The more we have, the more we want. And the only cure is to break the cycle of relativity.
- Zero is not just another discount. Zero is a different place. The difference between two cents and one cent is small. But the difference between one cent and zero is huge!
- These social norms get people to consider the welfare of others and, therefore, limit consumption to a level that does not place too much of a burden on the available resource.
- Our experience is largely determined by our prior beliefs, perhaps more so than the quality of the actual product.
Ratings and Recommendation
- Quality of Writing – The book was easy to read. The concepts were clear. The author has tried humour in between the book and tried to connect the audience as much as possible. The paragraphs were just right and the book was not stretched too much. There were 200+ pages that could be well read in a lesser time frame.
- Insights – The book is full with insights, examples and experiments which makes all the work easy to understand and connect. The only thing that could be taken into consideration that experiments were done only in the Top US universities with less sampling. For a diversified audience, the author could have researched other countries and places as well.
The book is highly recommended to those who have some idea of Economics and are familiar with the concepts of Demand, Supply, working of Macro and Micro units.
Ratings – 9.something/10