

Predictably Irrational: The Hidden Forces That Shape Our Decisions - robertk
http://bookoutlines.pbwiki.com/Predictably-Irrational

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Jasber
I recently read this book. I found it very good. However, sometimes his
explanations are long winded, which is why this reference is great.

Behavioral Economics is a fascinating field. It combines Psychology with
Economics and can more accurately predict human behavior because it includes
the Human factor.

Here's a sentence from another related book (Nudge) I'm currently reading on
the difference between Economics and Behavioral Economics.

 __ _To qualify as Econs, people are not required to make perfect forecasts
(that would require omniscience), but they are required to make unbiased
forecasts. That is, the forecast can be wrong, but they can't be
systematically wrong in a predictable direction._ __

In this book they use the term Econ to mean what a typical Economist thinks of
an average person.

This is an emerging field of Social Science that has seen tremendous growth.
As someone whose interested in both Psychology and Economics this is exciting
to see.

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markessien
It seems to me that these traits have become a part of us over a long process
of social evolution. So even though they may seem irrational when observed in
such a sterile environment, they must be the most successful behavior for
human beings to have, otherwise we would not be doing them.

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vlad
Great point! Except that the study of human behavior is used to manipulate
humans, such that these successful instincts are actually not optimal or do
not benefit the person in many situations. That in itself is part of social
evolution, which in itself is studied, which itself is part of social
evolution...

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aaronblohowiak
For more information on this, look up Edward Bernays, "The Engineering of
Consent"

From Wikipedia:

The Engineering of Consent" is an essay by Edward Bernays first published in
1947.[citation needed] He defines "engineering consent" as the art of
manipulation of people; specifically, American citizen, who are described as
"fundamentally irrational people... who could not be trusted." It maintained
that entire populations, which were undisciplined or lacking in intellectual
or definite moral principles, were vulnerable to unconscious influence so as
make them want things that they do not need. This was achieved by linking
those products and ideas to their unconscious desires. Ernest Dichter, who is
widely considered to be the "father of motivational research," referred to
this as "the secret-self of the American consumer."

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cschwarm
Note the homepage for the book: <http://www.predictablyirrational.com/> has a
'reseach' section where you can download many if not all of the original
papers.

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smanek
One of the things that struck me was that "People are sometimes willing to
sacrifice the pleasure they get from an experience in order to project a
certain image to others...People, particularly those with a high need for
uniqueness, may sacrifice personal utility in order to gain reputational
utility."

That alone explains so much ...

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cturner
This is underdeveloped, but something I've been thinking about on and off:

Hypothesis - there are klunky algorithms you can use that aren't all that
good, but which are very cheap to run. Humans have a lot of tradeoffs like
this built into them.

I can't think of great examples though. The strong natural link between fear
and desire to destroy (rather than - for example - the desire to investigate)
may be one. Yes, in the sandbox of one example the desire to investigate leads
to better outcomes, but perhaps across the board that doesn't work for the
amount of energy that we have available.

If I was buying a suit at that cost, I would have consumed more energy
considering the decision to buy than if I'd been buying a pen, and that would
influence whether I had the energy to travel for a discount.

My grandmother used to step back and analyse things by starting again and
working forwards from first principles. Smart lady, but she didn't have nearly
enough energy spare for things like doing the washing or cleaning her house.

Some of the things are very interesting and separate to this - particularly
where the decisions we make are completely opposite by the free vs non-free.
Decision tree hacking.

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Tichy
Great summary.

And I have often wished for a wallet that could prevent me from buying candy.

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mixmax
You can watch Kahneman's nobel prize lecture online here:
[http://nobelprize.org/nobel_prizes/economics/laureates/2002/...](http://nobelprize.org/nobel_prizes/economics/laureates/2002/kahneman-
lecture.html)

It explains the dynamics behind behavioral economics welll and is definitely
worth 45 minutes.

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nihilocrat
I see this as just a logical result of combining interest and understanding of
the subconscious, which was first seen roughly a century ago, with capitalism
from a consumer's perspective.

I agree with the "Predictably" part of "Predictably Irrational". Of course
people are irrational while they desperately maintain a proud veneer of
rationality, we've known for quite awhile now. Their conclusions are pretty
predictable, but I do appreciate that they've done these studies and tested it
in a variety of situations.

A strong will is increasingly becoming a human being's best tool for improving
their daily lives. It seems like more and more pitfalls are being deliberately
engineered in society that encourage us to abandon our self-control.

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jseliger
Ariely is an impressive writer and speaker; I saw him in Seattle and wrote
about it here: [http://jseliger.wordpress.com/2008/03/04/dan-ariely-in-
seatt...](http://jseliger.wordpress.com/2008/03/04/dan-ariely-in-seattle)

Check out in particular the link the ball video. His book also pairs well with
Tim Harford's <i>The Logic of Life</i>:
[http://jseliger.wordpress.com/2008/02/06/the-logic-of-
life-a...](http://jseliger.wordpress.com/2008/02/06/the-logic-of-life-and-tim-
harford-in-seattle-2)

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Herring
A lot of them aren't really irrational, or maybe it depends on your
definition. For example the endowment effect - it would be stupid to part with
your only ticket unless the buyer pays a large premium.

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smanek
You didn't understand. The point was that the same person would pay $X for
good A, but will only sell good A for $B, where $B >> $A..

Let's pretend that if I want a widget I am willing to pay $1 (but not $2) for
it. That means I would prefer to have the widget over $1, but prefer to have
$2 over the widget. However, if I have a widget I'm willing to sell it for $3
(but not for $2). That implies that I am would rather have the widget than $2,
which is clearly a contradiction with the previous conclusion. This is
irrational. (And it violates several of the key assumptions underlying
classical economics).

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Herring
Yeah I got that. There's a number of possible resolutions, eg selling the
widget might be an unnecessary hassle. The problem is we're starting with
different sets of premises. As I see it, a rational person considers many
factors in the decision to sell good A for $X. The amount he'd pay for it is
just one factor & probably the least important one.

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smanek
In the real world there are transaction costs - but for most people in the
example given (college students selling event tickets) they don't come
anywhere near $1000.

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elai
These seem like heuristics that people use to avoid fraud and other social
problems. They're 'usually correct'. And many of them learned from the
society. For example, I bet children can start with a lot of social behavior
expectations at new jobs that they would learn later are 'market behavior no
nos'. Or that people who hold on to their houses and waiting for market prices
to rise again are betting on a strategy that can work. The baseball ticket is
a quickly expiring good, while houses can last for a very long time.

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toby
I shared my unedited notes on this book a few months ago. I felt the book had
a few really cool findings and a lot of fluff, so I redid it as bullet-points:
<http://blog.kiwitobes.com/?p=49>

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qaexl
This is great information.

The first one, in _Influence_ but I never connected it with market positioning
until I read that.

The one about Cost of Zero is interesting in light of Web 2.0 Freemium.

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est
I am making a mindmap for that :-)

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ovi256
Please share it!

