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Predictably Irrational

Classical economics is the story of how humans are rational beings who calmly weight up the pros and cons of each economic situation before making a logical decision. Many aspects of the way our society works are built on this story of how humans think and behave. Unfortunately classical economics, although interesting, turns out to have some serious problems.

A new generation of social scientists – behavioural economists – are examine the actual ways in which people behave when making economic decisions and it turns out that the truth would have Adam Smith turning in his grave.

One of this leading the charge to educate us about the findings of behavioural economics is Professor Dan Ariely. And crucially he’s able to do so without sending us off the sleep.

In his book, Predictable Irrational, he uses his light and breezy style to describe studies demonstrating the situations in which we display irrational gnomic behaviour. What emerges is a picture of humanity that is sometimes irrational, but often predictable. In many ways we are actually distressingly predictable, such as our blind worship of all things ‘free’ or how we try to avoid difficult comparisons.

Ariely addresses these complicated problems with admirable clarity, which you can sample at his blog. The experiments he describes are all easy to understand and he points to their implications for society and its policy-makers. Sometimes it’s tempting to think he’s glossing over the hard stuff, but actually he’s just succeeding where many academics fail: by speaking plainly.

Ariely’s mission is to help us understand how our decisions are affected by societally, by our emotions and by relativity. And hopefully through this understanding allow us to escape the habits of economic behaviour we didn’t even know we possessed. So what might seem like a pessimistic book about human irrationality, turns out to be an optimistic book about how we can escape some of the tricks our mind plays on us.

Available from: Amazon • Amazon US

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Reviewed by Matt on 16 February 2011

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