BOOK REVIEW: PREDICTABLY IRRATIONAL

Suruchi Chopra
Sep 8, 2018 · 3 min read

Dan Ariely, a distinguished professor at the prestigious MIT Sloan School has authored a thought provoking book based on his research on behavioral economics, namely ‘Predictably Irrational’. He has elucidated how external influences such as emotions, expectations, choices as well as psychological factors as relativity, preconceived anchors lead to irrationality in our day to day decision making.

He wants to project a gap between the idealistic standard economic theory and the realistic behaviour based decision making. While standard economics has been founded on the assumptions of maximum utility and rationality of parties, there is an existence of predictable irrationality in humans resulting in a compromise in utility or satisfaction.

The basic idea of the book is to emphasize on the importance of behavioural economics as a subject matter of study. Mere acknowledgement of irrationality can pave a way forward towards rational decisions. On a personal level, it will help us in taking careful decisions concerning various aspects of our life while on a national level, it can be used as a basis for framing government policies. The starting point of an improvement and growth should be the reality with its inherent low points rather than an ideal theoretical situation as in case of standard economics.

The author has supported his arguments with variety of interesting experiments conducted in some of the renowned universities of the world. These simple yet profound experiments, although conducted for basic day to day decisions such as choice of food and beverages, free and priced products, honest and dishonest approaches etc., reflect upon the effect of irrational behaviour on greater decisions which affect an individual as well as a nation. For instance, immediate gratification in ignorance of long term goals guides the decision of saving less and spending more, hence adversely affecting the saving investment situation of a country. Author’s insights on the theory of relativity, presence of a free item in the bucket list, power of price, dishonesty in dealing with non-monetary transactions, etc. are an enlightening attempts to make the readers aware of what influences their actions, which they otherwise ignore or underestimate, thus reducing their vulnerability to bad decision making in future. The particular experiments of relativity and the misfeasance in non-monetary items fascinated me the most. As the world economy is going cashless, corporate frauds are at an all time high, thus striking a point with the author’s observation of increased chances of dishonesty when cash is not involved.

Author takes us through his research and studies as a teacher, explaining his subject point to point. It has been a great learning experience as well as a fun read.

A must for someone who wants to know why we behave the way we do!

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