Not as rational as we think we are
— -- Can thinking about an arbitrary number influence how much you're willing to pay for a computer keyboard, a bottle of wine or a box of chocolates? Apparently so — and the degree of influence may shock you.
In Predictably Irrational, Dan Ariely, a professor at Massachusetts Institute of Technology's Media Laboratory and the Sloan School of Management, put the question to the test in an experiment involving a group of MBA students.
The experiment began with students being asked to write down the last two digits of their Social Security number. When the experiment ended, it revealed a pattern — that students with Social Security numbers ending in the highest-ending digits (80-99) were willing to pay more for items (the wine, the chocolates, etc.) than students with the lowest-ending Social Security numbers (01-20) were willing to pay.
Experiments such as this make up the foundation of Ariely's book. Ariely argues that while economists continue to base theories on the idea that humans are rational — that we make optimal economic choices based the information we have — the notion is fundamentally flawed. Not only are we irrational, says Ariely, but when and in what form irrationality surfaces is predictable.
Economics can be a tough subject to tackle, but Predictably Irrational is surprisingly entertaining. While the book belongs in the same family as Freakonomics, don't expect the same kind of theoretical hand-waving. Ariely is less interested in regression analysis and more interested in simple behavioral experiments such as trying to determine if the first person to order a beer at the table is happiest with his choice (yes).
The book may be easy to read, but not everything Ariely writes about should be dismissed with a chuckle about how foolish we are. In a particularly racy chapter, he details an experiment in 2001 involving 25 male students at the University of California, Berkeley. They were asked to imagine being sexually aroused, and to answer questions related to sexual preferences and "the likelihood of engaging in immoral behaviors such as date rape." In this case, a participant was said to be in a "cold" state.
