Summary and Analysis of Predictably Irrational: The Hidden Forces That Shape Our Decisions: Based on the Book by Dan Ariely
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Predictably Irrational, the New York Times bestseller by Duke psychology and behavioral economics professor Dan Ariely, challenges the idea that we always make perfectly rational decisions. Featuring examples from daily life alongside results of his fascinating experiments, Ariely explains how emotional, psychological, and social factors can lead to irrational behavior—which can be damaging to ourselves and others.
From the coffee we drink or the medicine we take, to the companies we support and the relationships we value, we make irrational decisions every day that can cost us in the long run.
Ariely reveals not only when and how we tend to act irrationally, but why, so we can learn from our mistakes and design ways to facilitate smarter decision-making.
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Summary and Analysis of Predictably Irrational - Worth Books
Contents
Context
Overview
Summary
Direct Quotes and Analysis
Trivia
What’s That Word?
Critical Response
About Dan Ariely
For Your Information
Bibliography
Copyright
Context
Since the 18th century, when Adam Smith theorized that an invisible hand
automatically regulated the economy, the ideas of rational economic thought and free markets have dominated the field of economics. But in the past several decades a new field has emerged—behavioral economics, based on the theory that people don’t always act rationally, and often make financial decisions based on emotional, psychological, or social factors. Studying these forces can help us understand everything from why individuals struggle with weight loss and saving money to why corporations act immorally and healthcare costs are skyrocketing.
The global recession of 2008 challenged the ideas of rationality and brought behavioral economics to the forefront. Published that same year, Predictably Irrational, Dan Ariely’s first book, introduced the basic concepts of behavioral economics to the mainstream reader, including those explaining the irresponsible behavior in the housing market leading up to the recession. Filled with the findings from Ariely’s creative and entertaining studies, the book offers ways of understanding our irrational habits, and explains how we can use that information to make better decisions. The book clearly resonated with readers, becoming a New York Times bestseller.
As a leading researcher in the field, Ariely has since made a name for himself for popularizing behavioral economics and communicating its ideas outside of academia. He has gone on to publish four more books on the topic, and is a regular contributor to publications such as the New York Times, the Wall Street Journal, and Psychology Today.
Overview
While traditional economic theory assumes everyone in the market, given complete knowledge of a situation, makes perfectly rational decisions based on a cost-benefit analysis, behavioral economics acknowledges the ways in which emotions, psychology, and social pressures encourage us to make irrational choices instead. Predictably Irrational provides an in-depth look at the factors influencing our decisions, examining not only how we act irrationally but why, so that we can anticipate similar behaviors in the future and adjust our thinking to make more rational
decisions.
In each section of the book Ariely explores a different type of irrational thinking, providing examples from everyday life such as trick-or-treating, dating, or helping a neighbor move a couch to illustrate each concept. He delves into the power of expectations, such as how positive associations with a brand can increase our enjoyment of its product, and why patients taking fake medicine still experience real benefits. Ariely then creates experiments to document his often humorous observations, explains the results, and suggests ways to improve decision-making.
Ariely also introduces technical concepts, such as relative advantage; arbitrary coherence and anchor prices; the psychological pull and hidden cost of free goods; and how social norms influence our financial decision making. He shows how high emotional arousal challenges our ability to make rational—and even moral—decisions, and how the desire for immediate gratification leads to procrastination and limited self-control.
Part of Ariely’s project is