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Predictably Irrational by Dan Ariely

In: Business and Management

Submitted By 1ilmbm23
Words 519
Pages 3
Dan Ariely’s evaluation of human behavior in Predictably Irrationality is essentially eccentric especially to the science reader who is trained in a world of testable explanations, logical reproducible results and predictions. We prefer to believe we are logical beings, responsible for our actions and deserve to rip the credit for every success. Then enters behavioral economics.

Humans are rational beings, but not predictably. Ariely begins by affirming that humans think in relative measures. It is much easier to compare and contrast alternatives, which are familiar to us. The first chapter on relativity aptly shows limitations in judgment when faced with similar alternatives and the effect of a decoy. It seems his experiments suggest it is easier and more compelling for humans to compare 2 things, to keep a narrow focus and deliberately block out cofounding factors or scenarios. From his conclusions I learnt it is crucial to keep decision options simple, identify decoys and be able to introduce or break the cycle of relativity depending on your objective.

The concept of supply and demand is fundamental in economics and remains the backbone of a market economy. However goods of ostentation as shown by the example of the pearl used by Dan Ariely defy this concept. He however goes further to show that “anchors” could be used to attribute any price to about anything. I contend that in developing economies, where a larger part of the market is still trapped at the bottom of the Maslow’s hierarchy of needs, the contribution of goods of ostentation is smaller. Anchors will still be relevant however “need” would drive demand more than anything else.

The interaction between social and market norms were also skillfully demonstrated by Mr Ariely. In the healthcare environment this is particularly important during daily interactions with consumers and providers. We…...

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