This week I’d like to suggest Predictably Irrational from Duke Professor of Behavioral Economics and frequent NPR contributor Dan Ariely.

Predictably Irrational is a fascinating read premised upon the idea that the way that economists traditionally attempt to justify human behavior and predict outcomes is fundamentally flawed. The problem, argues Ariely, is that economics presupposes that human beings, with their capacity for higher order intelligent thought, think in a rational and reasoned manner and use such thoughts to shape their behavior.

As Ariely goes on to explain, humans beings are in fact quite irrational in the behaviors in which they engage on a daily basis. Contrary to traditional economic theories, when presented with two options (one of an obviously higher value) people quite frequently make the wrong choice.  Based partly in psychology and partly in economic theory, Ariely’s argument proposes that despite this tendency toward irrational behavior, humans are basically predictable in their poor choices, and that we (marketers in particular) can adjust our strategies accordingly.

Ariely argues that due to variations between social and economic norms, people will not always make what seems to be the logical decision. Take for example the following example:

Ariely and his team brought a tray of cookies to an office. When people were told that the cookies were free, everybody nicely took one, and then passed the tray on to the next person. The rationale being that nobody wanted to take more than their share. The team then returned to the office with a tray of cookies but this time offered them for the nominal fee of 5 cents. This time, people had no reservations about taking as many cookies as they wanted, justifying their behavior with the assumption that they were paying for their cookies and demonstrating little regard for the amount of cookies left for other people.

Despite the fact that nothing was stopping them from taking as many cookies as they wanted at the better valued ‘FREE’ price, people exhibited seemingly irrational self-restraint. Something as arbitrary as a 5 cent cost, however, allowed them to feel that they were somehow entitled to behave in a completely different manner. The reason for this, according to Ariely, is the dichotomy between social and economic norms.

I highly recommend Predictably Irrational if for no better reason than that the case studies are hilariously unpredictable and often quite engrossing. The book provides an extremely interesting look into how we make decisions as well as causing us to take a closer look at the way that we behave.

As always, we look forward to your comments, thoughts, and ideas.

-Patrick R

patrick@rabbitholeconsulting.com

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