David's Reviews > Predictably Irrational: The Hidden Forces That Shape Our Decisions

All classic economic theories are based on the assumption that consumers behave rationally, despite a considerable body of evidence to the contrary. It is only in the last 25 years that economists have begun to investigate the irrational side of consumer behavior. This field of investigation, which started with the pioneering work of Tversky and Kahneman, is usually referred to as behavioral economics.

Dan Ariely's book, "Predictably Irrational", offers a clear and comprehensive overview of this fascinating subject. If you are the kind of person (like me) who can't imagine using the words 'fascinating' and 'economics' in the same sentence, don't worry, the primary focus of the book is human behavior and its peculiarities, rather than economic theory. In particular, the author is concerned with elucidating how and why people continue to engage in behavior patterns that are detrimental in the long term.

In thirteen well-written chapters, Ariely considers such topics as:

• The effect of our need for a reference point before we can judge the value of something, and how clever marketers can exploit this
• How we can become trapped by our own behavior - the importance of first decisions
• How the prospect of getting something free can override reason and logic (is it really smart to wait for free-entrance night at the museum?)
• The effect of social norms (why you are more likely to agree to help your local charity by working for nothing, than for a quarter of your normal professional rate)
• The influence of arousal (we behave irrationally in the throes of passion - what you can do about it)
• The problems of procrastination and self-control
• Our tendency to place too much value on what we already own
• The destructive consequences of people's tendency to want to keep as many options open for as long as possible
• How our expectations of something can actually influence our ability to enjoy it
• The power of price (response to a $2.50 placebo is better than that to a 10c placebo)
• In what situations are people particularly likely to behave dishonestly? How can the triggers for dishonest behavior be disarmed?

The book is based primarily on work that Ariely has done with colleagues at M.I.T. and elsewhere. Two features make the book exceptional, in my opinion:

The ability of Ariely and colleagues to devise really neat experiments to test their hypotheses. All of the conclusions in the book are convincingly supported by often remarkably clever experiments.
Ariely does an extraordinary job of making his material interesting and accessible to a general audience. The book was a joy to read.

I highly recommend "Predictably Irrational".