Takeaway: People make bad decisions, Ariely shows us why.
Predictably Irrational is all about behavioral economics. Dan Ariely, unlike most economists does not believe that people are essentially rational and able to weigh the pros and cons of decisions and make perfectly rational market-based decisions. Instead the basic thesis of this book is that people are inherently irrational, but they are irrational in a number of predictable ways. So to better help people actually make good rational decisions, we should help them understand how they will be irrational.
This book is somewhat similar in format to Nudge or Freakinomics. It really tries to show its argument not through a series of reasoned belief statements or mathematical proofs, but through illustrations of the types of areas that people make irrational decisions.
There is a very good discussion on sex education, especially for teens. Traditional sex education, both explicit instructional education and “Just Say No” style abstinence education Ariely says make the same mistake, they expect the teens to be rational about their sexual decisions. Explicit educators think that teens if given enough information will be in the moment be able to make decisions about how to properly use birth control, or wait until it can be obtained, etc. Abstinence-Only advocates think that they can teach teen how to say no to sex in the moment of sexual temptation.
Ariely says both are wrong. He walks us through some controlled experiments with college age men that show that men at least have very little rationality when they are aroused. So either method does not work. Instead, Ariely thinks that we should focus on the quaint teaching method of helping students learn how to avoid temptation all together, and frankly discuss the problems of making decisions when aroused. Essentially this is a discussion of boundaries and sin that fits very well with the sermon series at my church “Guardrails“. (The book itself does not use the word sin.)
Another very interesting discussion is about the interaction between the social economy and the market economy. The market economy we all basically understand. But the social economy is the method by which we interact socially with friends, family and strangers based only on social contract, not financial reward. His first illustration is offering to pay your mother in law for the wonderful thanksgiving meal that she has just slaved over. The offer of payment for a gift meal would be highly offensive. And most other mixes of social economy and market economy are equally problematic.
The last part of this section is what I think is very interesting. It talks about how many businesses are moving more toward the mixing of social economy and market economy as they think of employees. They want employees to work at home, to think about work on their off time, to have positive social feelings toward work and to think of work as a social obligation, not just a financial relationship. Ariely sees some positive parts of this mixing, but he insists that if businesses want employees to participate in a social economy, then the business has to participate as well. It needs to provide full health care and other means of taking care of the employee, especially when the employee is in trouble. It is important that other employees see that social care of their coworker in order for them to trust that they will also be cared for later.
The discussion moves from there into a particular illustration of what motivates teachers. No Child Left Behind introduces market rewards into a system that is mostly about social economy. The more market rewards the less social rewards will work as a motivation (and the more expensive the market rewards will need to become to make a difference.) This chapter is very interesting when it comes to working with and for non-profits and churches as well as school systems.
If you are interested in why people make bad decisions, then this book has a number of reasons. I highly recommend it.
I listened to the audiobook. It was a narrated wonderfully by Simon Jones. It is also available in paperback and for kindle.