Predictably Irrational: The Hidden Forces That Shape Our Decisions

The book contains interesting insights as to why we seemingly act irrational in our day-to-day purchase decisions, getting us to think about why we make our decisions from a behavioral point of view. For example, under the cost of social norms section, the author explains how companies try to establish social norms with their employees in the modern economy, no longer expecting employees to punch-in for the 9 to 5 shift, but pay them on a fixed basis with incentives for their creativity and individual achievement, and in turn expecting them to work longer hours (or be connected 24/7). However, at the same timer, the obsession with short-term profits, outsourcing, and draconian cost cutting threatens to undermine it all. The author also devotes a chapter to thoughts about the subprime mortgage crisis and its consequences, discrediting the long-held view by economists that human behavior and the functioning of our institutions are best described by the rational economic model. He shows why people took on mortgages they couldn’t afford, what caused bankers to lose sight of the economy, why we didn’t plan for bad times, and how the government overlooked trust as an important economic asset.

While the book contains many insights as to why we mistakenly think that we are rational in our economic or purchase decisions, the author relies heavily on anecdotal style and un-scientific experiments to prove his point. For example, in questioning whether large bonuses for bankers are justified and therefore incentivize ever-higher results and returns, he assembles undergraduate college students at MIT and offers either a $600 bonus or $60 bonus for performing 4-minute tasks that involve cognitive skills or mechanical skills, showing how the tasks requiring cognitive skills demonstrated a potential higher bonus led to poorer performance. While the outcome may be consistent with the hypothesis, the experimental evidence used for this book mainly concern college students and very small (monolithic) sample sizes. For an academic, this book is very light on hard facts or scientific method.  For more technical research on buyer behavior, see the Senteo review for The Buying Brain.

Why do our headaches persist after we take a one-cent aspirin but disappear when we take a fifty-cent aspirin? Why do we splurge on a lavish meal but cut coupons to save twenty-five cents on a can of soup?
When it comes to making decisions in our lives, we think we’re making smart, rational choices. But are we?
In this newly revised and expanded edition of the groundbreaking New York Times bestseller, Dan Ariely refutes the common assumption that we behave in fundamentally rational ways. From drinking coffee to losing weight, from buying a car to choosing a romantic partner, we consistently overpay, underestimate, and procrastinate. Yet these misguided behaviors are neither random nor senseless. They’re systematic and predictable—making us predictably irrational.

This book is recommended for the general public, but may also be of interest to economists, marketers or business people working in retail or consumer goods. The nature of it is more anecdotal, but the book is entertaining.