Predictably Irrational

This commentary was initially published on 6 June, 2022, at the age of 18.

Book: Predictably Irrational
Author: Dan Ariely
Year: 2008
Pages: 304

Abstract: Human behavior is complex, fascinating, and utterly irrational, and we know a thing or two about it.

“Think how hard physics would be if particles could think.”

Predictably Irrational by Dan Ariely is an introduction to the world of behavioural economics and why we should care about it. The book gives an in-depth insight into the irrationality in our everyday decisions and their implications for businesses and policymakers. Even if we want to act rational, which conventional economics relies upon and does a relatively good job of predicting the economy in the long run, in the short run, changes are grossly misrepresented. Traditional economics assumes humans as utility-maximizing agents; however, measuring utility is difficult because consumers have their own scale of measuring utility which is subject to subjective judgment (If you are interested in how economists try to predict utility, have a read of an introduction to game theory). Even if it could be quantified, we certainly aren't good at it. Ariely gives insight into how concepts such as decoy theory (to force comparisons between easily comparable items) and relative advantage are used to manipulate the consumer's idea of utility. Additionally, the concept of minimizing waste and inefficiency is quickly forgotten at the sight of 'FREE.' Ariely further identifies how society separates social and market norms. People tend to be motivated by social situations and often work harder and happier than if it is treated as a 'job,'' even if their work is the same.

In short, we are all irrational in our own ways: we like having options, we like comparing easy things, and we like socialising. Human behaviour and personality all tie into our irrationality, influencing our decisions. Still, fortunately, these are repetitive tendencies, and identifying them sooner can help us make more rational decisions.

Dan Ariely's 'Predictably Irrational' is an enjoyable read, and it's filled with interesting examples of irrational behaviour. If you're interested in learning more about behavioural economics, this is a great place to start. On the other hand, if you do have knowledge on the topic, there is little depth that Ariely provides, especially in terms of an academic lens. Additionally, I did note that there is often a repetition of ideas, which is not inherently wrong but often underwhelming. Despite these shortcomings, the vast depth of examples and studies he provides are thought-provoking and leave you thinking about your own irrational behaviour. However, if you're looking for a deeper understanding of behavioural economics, you may want to look elsewhere.