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Irrational? Me?? Who you callin’ irrational?!?!
The Atlanta Journal-Constitution
Have you ever done this? You’re on Amazon.com, and you order a book for $20. The website tells you that if you will buy something else, you will get free shipping. So even though you didn’t really want anything else when you logged on, you think of the money you will save, and you go find something else, add it to your cart, just to get the free shipping.
That’s a prime example of what Dan Ariely is talking about in his new book “Predictably Irrational: The Hidden Forces That Shape Our Decisions.” Ariely is a professor at M.I.T. in a discipline called behavioral economics, which is the study of how real people behave in real situations, as opposed to theoretical economics.
Ariely shows, over and over and in a startling variety of ways, how many things we do that simply make no sense. “Our irrational behaviors are neither random nor senseless,” he writes. “They are systematic.” In other words, we all tend to make the same sorts of mistakes, such as wanting things that are free even when they end up costing us more.
The AJC’s Richard Halicks interviewed Ariely for our @Issue section recently. You can read the whole interview here. But here is an excerpt in which he talks about the topic of “market norms” vs “soclal norms.” Here’s Ariely:
“We live in two kinds of worlds. We live in a social world in which we do things for each other for friendship, and love. And we live in a world of work — money per hour and so on. Here’s an example. You go on a date with a woman. You go to dinner and a movie. As you lean in to kiss her at the end of the evening, you say, “You know, it’s interesting, I spent about $150 on this date so far.” Now, you haven’t said anything new. Prices are printed on the menu. Prices are printed on the ticket. She knows exactly how much you spent. Saying it will kill the date. There’s no way for a goodnight kiss at that point. Because this is a violation. It’s a mix of norms.
We know how to deal with financial contracts. And we know how to deal with social contracts. And when these two things mix, they lead to unexpected circumstances. Imagine if I asked you to help me change a tire on my car. You think, “Hmm, he looks like a nice person, why not?” How about if I offer you five bucks for it? You don’t tell youself, “Hey, I get to help Dan plus I get $5 in the deal!” No. What happens is that the $5 completely replaces the social motivation, and you say to yourself, “I don’t work for $5. Offer me a hundred, and we can talk.”
There are many ways to think about the implications of this idea. Think about the No Child Left Behind policy. Teachers are not paid much money in general. And we rely to a large degree on their intrinsic motivation — the meaning that they get from work — as one of the main drivers of their effort and motivation. And now we have the No Child Left Behind policy in which we offer payment for performance. How does it make a teacher feel differently when they worry about pay for performance rather than ideology and motivation? I think these are the cases in which [market norms] can dramatically backfire.”
I hope you can see why I’m impressed with “Predictably Irrational.” His chapter on rewarding teachers and No Child Left Behind is particuarly interesting; that excerpt barely does it justice. There’s also a website with excerpts.
Is anyone else reading “Predictably Irrational?” Do you recognize your own behavior in the brief, crude summaries here?
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