We are KNUCKLEHEADS!

We humans are knuckleheads. That’s what you will surmise from the countless entertaining studies and anecdotes that Ariely describes in this fantastic book about behavioral economics. Why else would we let something as seemingly irrelevant as a Social Security number determine how much we’d pay for a bottle of wine? Why else would we easily steal a pen, but wouldn’t consider taking the cash equivalent of that pen? Why else would we pick a beer that we don’t want just if it was the only one not ordered by our friends? These are the type of things that Ariely seeks to uncover in “Predictably Irrational” and, which, coincidentally act as a fantastic support for the financial behaviors I describe in How to Take Advantage…. Ironically, however, the fact that Ariely is so successful at explaining these quirks in human behavior works directly against the thesis of the book itself.

Ariely says his field, behavioral economics, takes a novel twist on the traditional science of economics. Instead of assuming that we humans have all the appropriate information about our decisions, he argues we make mistakes in the real world–that we’re irrational. But if that really were the case, Ariely’s book wouldn’t be very good. On the contrary, we let our Social Security number affect our wine budget when it’s used as a necessary frame of reference; we see a pen as worthless because it’s once-removed from cash; and we order a different beer to satisfy our social needs to be unique. There ARE reasons why we do things and that makes all this whacky behavior just seemingly irrational, not truly irrational.

Another book, The Logic of Life, uses the same type of studies to show exactly that: seemingly irrational behavior in society actually makes sense when you can uncover the ulterior motives and forces that act on us.

The fact that Ariely misses this should not deter anyone from reading it–it’s a wonderful and well-written book that will open an eye or two as to the reasons why we do such SEEMINGLY irrational things.