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Predictably Irrational: The Hidden Forces That Shape Our Decisions


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ISBN13: 9780061353239
ISBN10: 006135323x
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Late in the afternoon of October 13, 1972, Flight 571 lift ed off from the Mendoza airport in western Argentina. A rugby team had chartered the dual-engine Fairchild to play a game in Chile. The men were young and well-heeled, aspiring lawyers, doctors, and architects, and as the plane rose into the Andean sky, they read comics and played card games.1 A few tossed a rugby football down the aisle, yelling “Think fast!”2 When a spot of turbulence shook the plane, they whooped and hollered like bullfighters.3

   As the Fairchild flew over a narrow, mountainous pass, the plane slipped into a dense bank of clouds. Strong winds started to rattle the aircraft . At one point, the Fairchild dropped a few hundred feet, and when the clouds finally drew apart again, a rocky cliff appeared just beyond one of the wings.

   “Is it normal to fly so close?” one of the passengers asked.4

   “I dont think so” his friend answered.

   Moments later, some long shudders, a metallic scream, a rocky crag scraped the bottom of the fuselage. The tail section crashed away. The wings broke off . The plane soared for a moment or two before, skidding down the slope of a mountain “like a toboggan.”5 Some of the passengers died in their seats. Others bled to death. But among the lifeless bodies and splintered luggage, more than two dozen passengers survived, spending the night huddled together in the wreckage of the broken plane.

   The Fairchild had landed in a snowy valley, miles away from the nearest village. The temperature was brutally cold, and the team had packed for a trip to the ocean, not the mountains. No one had any warm coats.6 There were no blankets. To survive, the men began dividing themselves into teams. Two of the young men were medical students, and they took care of the wounded. Another group figured out how to make fresh water by melting snow into empty wine bottles.7 Others straightened up the plane and aired out the seat cushions.8

   Few thought that anyone could have survived the crash. Three countries sent out rescue teams, but officials soon called off the search. One of the young men had uncovered a small radio in the wreckage, and he heard an announcer say that the rescue effort had been canceled. The news was met with silence. Some of the men started to weep. A few days later, an avalanche rumbled into the valley, and the heavy, wet snow killed another eight survivors. “It is hard to describe the depths of the despair that fell upon us in the wake of the avalanche,” wrote Nando Parrado in his memoir, Miracle in the Andes. “Now we saw that we would never be safe in this place.”

   The men had almost no food. Just a few candies and nuts, and the survivors soon realized that they would have to eat the bodies of the dead in order to survive. It became a ritual of sorts, and each day, a few of the men would pull a frozen corpse out from the snow, cut it open with a small knife, and slice out bits of muscle and fat. Sometimes the meat was cooked.9 Usually, it was eaten raw. Since the men did not know how long they would be in the mountains, they ate the meat in tiny servings, sometimes as small as a matchstick.10

   Among the men, the urge to be selfish, to take a little more food or clothing or water for themselves, was strong. Everyone was deeply hungry. Everyone was exquisitely cold. But the survivors developed a sense of togetherness. They encouraged each other relentlessly. It was about what was best for the group, and the men created a strict system around sleeping positions since spots farther from the door were warmer and more comfortable.11 Everyone received the exact same ration of cigarettes.12 The men continued to care for the wounded, massaging the feet of the injured to protect their toes from frostbite.13 “When one suffered, everyone did. If someone did something wrong, everyone reacted,” Fito Strauch later explained.14 “There was no room for anyone to do anything that was against the general interest. It was like a 19-bodied organism.”

   The survivors also developed “expeditionaries,” a small group of men who would try to climb out of the valley, and those men received additional clothes, food, and water. The expeditionaries were also excused from chores so that they could save up their strength.15 And early on the morning of December 12, after nearly two months in the mountains, two of the expeditioners set out in the snow and ice. They clambered over boulders, slid down river gorges, until miles later, the men stepped onto the high plains of Chile and spotted a cattle herder. A military helicopter soon rescued the rest of the survivors. Many of the men were near death. Some could barely walk. One man boarded the helicopter holding the downed planes Exit sign.16

   Movies, books, a documentary, they have all been dedicated to the Andes crash. But still, the question nags: How did the men survive? There are some partial explanations. Religion played a role for some of the men. Almost all of the survivors were athletes of one sort or another. But in the end, the men persevered because they had faith in each other. By coming together as a group, by trusting each other, they built the sort of tight-knit band that could live for seventy-two days in one of the harshest places on earth. Or consider this: Each survivor swore that if he died, the others could eat his body in order to live. “None of us were saints,” Parrado once wrote. “We survived not because we were perfect, but because the accumulated weight of our concern for each other far outweighed our natural self-interest.” And its that weight — and the social trust that we need to succeed — that is the central idea of this book.

According to conventional wisdom, humans are plainly self-interested. While we can create laws and religions to induce good behavior, we typically view ourselves as a species of unrepentant narcissists. This notion is widespread. Theologians argue that we are born into sin. Economists suggest that selfishness is good. The only thing that holds us back from anarchy, it would appear, is the threat of societys sanctions — and the lure of its rewards. In other words, people shouldnt trust because people are not trustworthy.

   But this view of human nature isnt fully accurate. Consider, again, the men stuck in the Andes. They were stranded in brutal conditions. But still they shared food and clothing and took care of the wounded. So why did the men work together? In recent years, science has offered a convincing answer — and it turns out that we cooperate with others because were wired to do so. Humans are the most social of social species, and were far more trusting — and trustworthy — than weve long believed. A faith in others is an essential part of our biology, and from Neolithic villages to the rise of nation states, no other species has been as successful as Homo sapiens at working with others.17

   But despite the mounting evidence, we rarely give much attention to our social ways. Instead, we try to motivate people using sweet carrots or hard-edged sticks. We dont realize that a sense of connection can matter as much as a bit of cash. We treat fairness as something that matters only to children. We believe, simply put, that others are not worthy of our trust, and today almost 60 percent of Americans believe that “you cant be too careful dealing in dealing with other people.”18 Less than a quarter say that they have faith in Washington to do the right thing.19 Just about one in ten Americans think that their business leaders are honest.20

   This lack of trust has a long history. Blame hour-long commutes and iPads and the Great Recession. Blame the growing pressures of time and money. Blame hyper-individualism, and today about a quarter of college students qualify as narcissists.21 We can even blame the media, and because of headlines that scream the news of one crisis after another people believe that the world is far more cruel-hearted than it really is. So while violent gun crime has been dropping steadily, most Americans believe that its on the rise.22

   On one side, society has changed, and we will not return to the social cohesion of the 1950s anytime soon. But at the same time, we all need to be part of something bigger than ourselves. We are all motivated by more than our own self-interest, and our faith in others is a type of social cement. Its the currency of our social capital.23 Its what keeps families, organizations, even nations together. No economic, political, or social system can function without trust, and theres an almost parallel relationship between trust and economic growth.

   Or think of trust as a type of tax on human interactions. In a lowtrust environment, every exchange, every conversation, carries an additional cost, causing transactions to be less productive. High-trust groups dont pay this tax, and so theyre far more effective. This makes faith in others crucial to our economy, whether its a customer hiring a contractor to build a new bathroom or having confidence that a colleague will do his share of a project. Its also what makes trust central to our democracy. To go to the polls, voters need to believe that elected officials will deliver on their promises.

   In many ways, the issue is that we simply dont appreciate how dependent on trust we already are. Or just recall the last time that you drove your car. At every traffic light, at every stop sign, you placed your faith in someone youve almost certainly never met and probably will never see again. This book, then, is an attempt to make the invisible power of trust a little more visible. But more than that, I want to show you how the science of trust, the power of our social ways, can lead to more effective organizations, a healthier economy, and a stronger nation.

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pammik246, February 6, 2009 (view all comments by pammik246)
If you liked Malcom Gladwell's books you'll love this one. Ariely presents in an enjoyable read well grounded in research. I read psychology all the time and found the economic psycholoy presented here fun and fascinating and very useable when talking to friends and clients about how we make decisions. pammik
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Jaffer, March 10, 2008 (view all comments by Jaffer)
I enjoyed reading the book but now that I think about the examples and experiments discussed, I find most of them flawed. So, I wondered why I did not catch the flaws when reading the book. It was I think because Dan (the author) either cleverly manipulates the readers or is a natural at it and does not realize he is manipulating them. I'll reserve personal judgement, whether his style is purposely or inadvertently manipulative. Perhaps publishing the book is yet another experiment that he is conducting to see how people respond to the examples and experiments he has reported in the book.

Without further ado, let me begin.

His very first discussion is about his personal experience with a tragic severe skin burn, which led him to question how people perceive situations and how they rationalize or explain their own behavior and that of others. In writing about his own experience he drew my sympathy and admiration for overcoming his tragedy and delivering interesting research to the mass audience. Very clever, Dan! You got me.

Throughout the book he mentions MIT, Harvard, Berkeley as the places where he conducts research and that he had an offer to be at Stanford - he cleverly drops names of prestigious institutions, all in an attempt to create an impression that his work is rigorous. Sub-consciously I guess I gave him a pass while reading the book, but now I feel I was duped.

Here are some flaws with the examples and/or experiments he discusses:

1) The experiment where some students who won football tickets in a lottery, offered to sell their ticket, and the students, who did not win a ticket, offered to buy one from the scalpers (brokers) is flawed and shows that Dan does not understand basic economics. He finds it irrational that those who won the tickets changed their perspective and wanted on average $2400 to sell their tickets, whereas those who did not win a ticket in the lottery were willing to offer only $170 to buy a ticket to the game.

I think the reason why the ticket winners wanted $2,400, on average, for their tickets was probably because that was the "going" price in the secondary (scalpers) market, just before the game. And, the reason the students who did not win the tickets in the lottery were willing to pay at most $170 or $175 (Dan reports two different numbers) is because that's all they could afford. Students don't have the wealth to offer the "going" price in the broad market comprising mostly of alums who can afford $2400, given they are in town and want to be at the game. It is not irrational for students (or people in general) to have different reservation prices when they are selling an item versus when they are bidding to buy one.

The amount people bid for an item depends on their BUDGET (endowment) but what they ask for an item, in order to sell it, is not constrained by their budget but mostly depends on the "going" price that they can get from the highest bidders.

2) Dan makes a big deal about people taking items which are for free but unwilling to pay 1 cent for the same items if that were the price posted by the seller. This behavior, he claims, is irrational. The obvious reason that people are attracted to free items is simple: they don't have to look for change (1 cent or 2 cents) and spend the time to transact. Dan ignores (does not recognize) simple factors like transaction costs to explain much of the behavior of individuals. There's no deep psychological reason for choosing free items as Dan seems to suggest.

3) He suggests that perhaps our ethical compass is coarse - i.e., for most people the compass does not respond to petty theft they commit but it does respond to large scale theft they might contemplate. He gives the example that many people don't (and wouldn't) steal a carton of red pencils from work but they do (or would) steal one pencil from the stationery room at the office. He does not recognize that most people don't (and wouldn't) steal a pencil from a store but they do (or would) take a pencil from the workplace. Clearly the issue is not about the number of pencils but rather the context where the pencil is to be had.

I believe we take a pencil (or two) from work, for our personal use, without paying for it, in cash, but we don't take from a shop because we have a "working" and "cordial" relationship with our employer -- i.e., there's an implicit understanding that we can take certain items from the workplace. Also, if we wish, we can compensate the employer by working a little longer. In taking small-price items from the workplace avoids the transaction cost and the hassle of purchasing a 10 cent pencil at a store or compensating our employer 10 cents in cash for the cost of the pencil.

In my opinion, the social welfare is greater by taking the pencil from the employer instead of forcing a transaction cost on the employer and on oneself and paying the 10 cents. Even leaving 10 cents with the secretary entails a significant transaction cost for the firm. Therefore, it is better to just take the pencil.

Moreover, the reason people don't steal an entire box of pencils is because they don't need so many pencils -- they need only one.

Since most people would take a pencil from work even when the secretary or the boss is looking, means there is no ethical ambiguity to the act. I don't think Dan has seriously thought about such issues and his research is what a high school student at a mediocre school would do.

4) The experiment about leaving coke in a fridge in a common area versus leaving $$ bills in a common area is a flawed comparison. Dan reports that people are able to rationalize stealing coke but not stealing money (or even a single $ bill from a stack of bills.) He does not recognize the possibility that many people don't mind sharing a 6 pack of coke or beer with others in a dorm suite (when they leave it in a fridge) whereas the money left in a common area is not for sharing -- we all understand that -- but is there most likely because someone accidentally left it there.

If the experiment of leaving coke and money is conducted near a fridge, as reported in the book, then of course people will take the coke, and not the money, because they probably came to the fridge for a drink. But if the coke and money were left at a different place, perhaps where people are required to pay a fare or a fee, like paying for parking at a meter, and if no one is watching, then some people would probably pick a $ from the stack of bills to pay the parking fee, instead of picking a can of coke to drink.

The reason why people take a coke from a common area in the dorm suite, but not the money is because coke quenches their thirst immediately for which there may not exist another substitute whereas taking a $ would not satisfy one's immediate thirst. Most people have some money in their pocket and taking a few bucks from a stack would not increase their utility as much as the cold can of coke would for a thirsty person, who does not carry cold coke around, as one does cash.

5) His example of unethical behavior of returning clothes, after using them, is also flawed.

As long as merchants know that customers could be using clothes (and books and other items) and then returning them, the contract between the sellers and the buyers, which includes a return policy, is an arrangement that is acceptable and even preferred by the merchants. Indeed, return policy is set by merchants when they have the alternative to insist that all sales are final - as some merchants do. The returns policy has evolved over time, with cool business-minded thinking! There's nothing unethical about returning clothes or books, even if used, because the merchant allows it.

It seems there's an optimum for the sellers to have a return policy arrangement than without one. Some items in stores are marked as "final sale." Some stores specialize in selling items at a discount and they do not allow returns. A non-returns policy might lead to lower sales and profits and that's possibly why firms allow returns, even for expensive clothes.

Bookstores, for example, encourage patrons to browse the books and magazines, while eating and drinking in their coffee lounges. The lounge environment soils their books, damages the covers, and causes bookstores to hire additional workers to pick up the books and reshelf them. Yet, they choose to offer such environments. From Dan's perspective, those who buy itemsn, use them and then return the items, are cheating the merchants and violating a social ethic. But, clearly, the bookstore personnel can observe the cutomers who read but don't pay for the items and yet they don't complain or post rules in the lounge area reminding patrons to pay for the items they take to the coffee lounge.

Moreover, merchants can institute a policy whereby returned items are charged, say, a 15% re-stocking fee - i.e., the customer would not receive the full refund - and yet most merchants choose not to institute this policy. Some tried doing so but then decided to reverse it. Circuit City comes to mind.

6) The chapter on students procrastinating by submitting their papers at the end of the term, which ends up earning them poorer grades, is also flawed because Dan does not control for the mindset and biases of the graders.

For example, graders may grade harshly when all the papers by several students are submitted at the end of the term, which have to be graded quickly and the course grades submitted to the department secretaries, at a time when the graders (usually grad students) are exhausted. However, when the papers are submitted periodically, over the term, graders have more time and not as many papers to grade in a short period of time and so they could be more lenient and willing to award higher grades. Also when papers are handed earlier during the semester, students have learned less in the course and are not expected to know as much. Thus, graders could be lenient in grading papers submitted periodically, during the semester, versus when all are submitted at the end of the term.

I could go on pointing flaws, but I think Dan does a disservice to MIT and to customers who buy his book because his experiments and explanations are not well thought out.

Oh well, if you wish to read the book then by all means do so. And if you don't like it, there would be nothing unethical in returning the book, in my opinion, and then writing a review.
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Karen O., February 19, 2008 (view all comments by Karen O.)
Absolutely on the money! I can see myself in many of the situations & am thoroughly amused by Dan's insight into human falibility.
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Product Details

The New Economics of Matchmaking and Market Design
Ariely, Dan
Boser, Ulrich
Roth, Alvin E.
by Dan Ariely
Eamon Dolan/Houghton Mifflin Harcourt
General Business & Economics
Economics - General
Social Psychology
Consumer behavior
Edition Description:
Trade paper
Publication Date:
Electronic book text in proprietary or open standard format
Grade Level:
9 x 6 in 1 lb

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Predictably Irrational: The Hidden Forces That Shape Our Decisions Used Hardcover
0 stars - 0 reviews
$9.95 In Stock
Product details 272 pages Harper - English 9780061353239 Reviews:
"Synopsis" by , In the tradition of "Freakonomics" and "Blink," a behavioral economist argues that human behavior is often anything but rational--that thoughts are not random, but instead are systematic and predictable.
"Synopsis" by , Best-selling author Ulrich Boser explores how we and the institutions we rely on have much to gain from emphasizing and rebuilding trust.
"Synopsis" by , A Nobel laureate reveals the often surprising rules that govern a vast array of activities — both mundane and life-changing — where money plays little or no role.
"Synopsis" by ,
A Nobel laureate reveals the often surprising rules that govern a vast array of activities — both mundane and life-changing — in which money may play little or no role.

If you’ve ever sought a job or hired someone, applied to college or guided your child into a good kindergarten, asked someone out on a date or been asked out, you’ve participated in a kind of market. Most of the study of economics deals with commodity markets, where the price of a good connects sellers and buyers. But what about other kinds of “goods,” like a spot in the Yale freshman class or a position at Google? This is the territory of matching markets, where “sellers” and “buyers” must choose each other, and price isn’t the only factor determining who gets what.

Alvin E. Roth is one of the world’s leading experts on matching markets. He has even designed several of them, including the exchange that places medical students in residencies and the system that increases the number of kidney transplants by better matching donors to patients. In Who Gets What — And Why, Roth reveals the matching markets hidden around us and shows how to recognize a good match and make smarter, more confident decisions.

"Synopsis" by , Were not supposed to trust others. Look at the headlines. Read the blogs. Study the survey data. It seems that everyone is wary, that everyone is just looking out for themselves. But a sense of social trust and togetherness can be restored.

In The Leap, best-selling author Ulrich Boser shows how the emerging research on trust can improve our lives, rebuild our economy, and strengthen society. As part of this engaging and deeply reported narrative, Boser visits a radio soap opera in Rwanda that aims to restore the countrys broken trust, profiles the man who brought honesty to one of the most corrupt cities in Latin America, and explains how a college dropout managed to con his way into American high society. Boser even goes skydiving to see if the experience will increase his levels of oxytocin, the so-called "trust hormone.”

A powerful mix of hard science and compelling storytelling, The Leap explores how we trust, why we trust, and what we can all do to deepen social trust. The book includes insightful policy recommendations along with surprising new data on the state of social trust in America today.

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