5 ms·

Dan Ariely and Irrational Comparison

93 points by brendancahill 6y ago

2T1Qka0rEiPr 6y ago
I read Ariely's "Predictably Irrational" years and years ago, and was fascinated by it. I'd been an economics graduate, and was surprised that we were only introduced to "Behavioural Economics" as a field in the final semester of the course. To be sure, if you want to read far more academic material, you should look at Kahneman, Sunstein or Thaler's books - but Ariely's writing style is in my opinion more fun and approachable to the lay person. It was definitely my gateway drug into the subject matter.
- sprafa 6y ago
  Charlie Munger said "if economics isn't behavioral, what the hell is it?"
  - beefield 6y ago
    A weird bastard child of ideology and mathematics.
    - clairity 6y ago
      note that an ideology on its own is not bad (or necessarily good). it's being ideological--adhering to an ideology against any and all evidence--that's bad. humanity, including science, economics, the arts, etc., is driven by ideology, ideas that take hold because of a tantalizing kernel of truth in them. progress (and regress) happens on the back of ideology. the rational actor at the center of economics is an ideological construct that we act to always maximize our economic return. how we adhere, and the system adheres, to that ideal has been the focus of a significant strain of economic thought. behavioral economics is another ideological strain that focuses primarily on those deviations (perhaps as a dominant mode) rather than the adherences of the progenitor ideology.
- kashyapc 6y ago
  About 10 years ago, I too, as a newbie-layman, started with "Predictably Irrational". I recall being similarly fascinated, and recommending it to anyone who'd listen to me. It's surely a gentler start to the field; and I concur with you on suggestions for deeper material.
  - ghaff 6y ago
    Nudge is pretty easy reading from Thaler and Sunstein. Personally tough, I preferred his Misbehaving which goes into his history with the field. Way back when, I had a couple courses with Thaler when he was calling the field Behavioural Decision Theory.
    - 2T1Qka0rEiPr 6y ago
      Agreed - Misbehaving is a really interesting history of the development of the field, and the characters introduced along the way. I was also doing Thaler a dis-service, I find his writing to be far more page-turny than Kahneman or Sunstein.
      - tuatoru 6y ago
        > Misbehaving is a really interesting history of the development of the field A Thaler-centric history. There are others... (I have a copy of Misbehaving.)
    - kashyapc 6y ago
      Thanks for the 'Misbehaving' recommendation.
cbsmith 6y ago
The concept of anchoring is pretty ancient, no?
- mavelikara 6y ago
  And Joel Spolsky, in 2004, summarizing thoughts on pricing and segmentation: https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-duckies/ https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-...
noelwelsh 6y ago
I think it is worth noting that some of the more surprising results in the behavioural economics literature have failed to replicate. A quick search will find many articles discussing this. I believe there is definitely a strong core in behavioural economics, but the especially "pop science" experiments (e.g. people walk more slowly when primed to think about old age, which IIRC is in "Thinking Fast and Slow") should be taken with a grain of salt.
- 2T1Qka0rEiPr 6y ago
  This is fair criticism from what I've seen too, though for passers by I'd just say that it shouldn't necessarily entirely discredit the field. What particularly interests me, is the "nudge" applications which have been adopted by govts. over the past number of years. Whilst most of their plans miss, the ones that stick are incredible, such as the setting of defaults to drastically increase organ donors and improve pensions and investments.
  - Kosirich 6y ago
    Was about to make similar comment about connection with behavioral economics and how we should be wary of certain claims. Also there is some strong criticism of applying nudge theories on complex systems. That being said, as you point out as well, some nudge techniques do lead to beneficial results (for all) and I think it's important to recognize (and econs. point out) that if you design a UX, process, building, gadget ect. you are by definition what they call a choice architect. Side note: I was fascinated how much design/choice/nudge thinking is considered here in Denmark. It's very noticeable in design of public buildings and govt. webservices
  - nostromo 6y ago
    I’m not sure I want the government opting me in to programs any more than I want Google opting me in to things that may not be in my best interest. If dark patterns start working their way into government, god help us all.
    - okintheory 6y ago
mojuba 6y ago
Tricking the mind though can lead to higher churn rates (poorer retention rates) later. Most people do realize what the true value of their purchase is sooner or later - it might take a few cycles, e.g. monthly subscription payments to make the right conclusions. You might have a spike in your revenue figures now but you might see deteriorating retention indicators a few cycles later. In other words some (many? all?) "tricks" work only in the short term. In fact some of your users will leave your platform with the negative aftertaste of having been tricked.
coderintherye 6y ago
His follow-on book: "The Upside of Irrationality" is also a great read.
- mdoms 6y ago
  It's almost the exact same book. I felt ripped off having bought both.
  - sokoloff 6y ago
    You sound like an ideal customer for his next book: The Downside of Rationality./s
  - sharker8 6y ago
    He should release a mini ebook for free. To capture the irrational value we place on free stuff, of course.
bobosha 6y ago
Isn't this known as the Decoy effect? Having a middle tier makes the pricing more palatable.
xondono 6y ago
I've been very interested in the behavioural economics field in general, but for some reason I always find that Ariely tends to jump too fast to conclusions. Most of his experiments I read about have other explanations that fit the data just as well. For instance, the "The Economist" subscription has another explanation to simple comparison, choice deferral. People don't really know if they'll want the online or print version, so are happy to pay extra for not having to make that choice now. If you only give them the two choices, you force them to choose. I'm not saying he is wrong, just that I miss him considering other alternatives (that to me sound way more plausible, but are less publication-sexy).
- ced 6y ago
  I don't get your argument. Those who are in "choice deferral" and chose online+print in the first experiment ought to have picked the same in the second experiment, but they didn't.
  - xondono 6y ago
    If you make me chose right now between online and print, I need to think which of those suits me better, will I read on my phone? Would I rather have the physical thing and have some rest time from the screens? If there’s an easy to pick offer bundling the two, I’d rather pay the extra to keep the choice open, that is, to choose later.
    - theplague42 6y ago
      But that's not what happened! When the print-only option was removed, people switched to the cheap online-only option. I recommend you re-read the description of the study.
- mekoka 6y ago
  Regarding choice deferral, perhaps you should take another closer look at that experiment. It seems to me that you may have missed the fact that the choice that was taken away is not "online + print", but rather "print only", which yielded 0 subscribers in the original batch.
nate 6y ago
If you're a fan of Dan's, I just realized recently he has a board game out! https://irrationalgame.com https://irrationalgame.com
kwhitefoot 6y ago
There is nothing irrational in seeing the right hand orange circle as bigger. It even says so in the text: "depends on context". The word irrational in the tile is just clickbait.
vaidhy 6y ago
I was originally fascinated by this book and others like it. During the course of my reading, I stumbled upon Gerd Gigerenzer and I learnt a different interpretation. In short, most of these experiments assume full information is available to the testers and make an argument about rational process. As such, their applicability in real life is small, in specific edge cases. The question we should ask and answer is that, in a world of partial, incorrect and misleading information, what is the most rational judgement to make? And that mostly matches with how we behave.

93 points by brendancahill 6y ago

I read Ariely's "Predictably Irrational" years and years ago, and was fascinated by it. I'd been an economics graduate, and was surprised that we were only introduced to "Behavioural Economics" as a field in the final semester of the course. To be sure, if you want to read far more academic material, you should look at Kahneman, Sunstein or Thaler's books - but Ariely's writing style is in my opinion more fun and approachable to the lay person. It was definitely my gateway drug into the subject matter.

sprafa 6y ago
Charlie Munger said "if economics isn't behavioral, what the hell is it?"
- beefield 6y ago
  A weird bastard child of ideology and mathematics.
  - clairity 6y ago
    note that an ideology on its own is not bad (or necessarily good). it's being ideological--adhering to an ideology against any and all evidence--that's bad. humanity, including science, economics, the arts, etc., is driven by ideology, ideas that take hold because of a tantalizing kernel of truth in them. progress (and regress) happens on the back of ideology. the rational actor at the center of economics is an ideological construct that we act to always maximize our economic return. how we adhere, and the system adheres, to that ideal has been the focus of a significant strain of economic thought. behavioral economics is another ideological strain that focuses primarily on those deviations (perhaps as a dominant mode) rather than the adherences of the progenitor ideology.
kashyapc 6y ago
About 10 years ago, I too, as a newbie-layman, started with "Predictably Irrational". I recall being similarly fascinated, and recommending it to anyone who'd listen to me. It's surely a gentler start to the field; and I concur with you on suggestions for deeper material.
- ghaff 6y ago
  Nudge is pretty easy reading from Thaler and Sunstein. Personally tough, I preferred his Misbehaving which goes into his history with the field. Way back when, I had a couple courses with Thaler when he was calling the field Behavioural Decision Theory.
  - 2T1Qka0rEiPr 6y ago
    Agreed - Misbehaving is a really interesting history of the development of the field, and the characters introduced along the way. I was also doing Thaler a dis-service, I find his writing to be far more page-turny than Kahneman or Sunstein.
    - tuatoru 6y ago
      > Misbehaving is a really interesting history of the development of the field A Thaler-centric history. There are others... (I have a copy of Misbehaving.)
  - kashyapc 6y ago
    Thanks for the 'Misbehaving' recommendation.

cbsmith 6y ago

The concept of anchoring is pretty ancient, no?

mavelikara 6y ago
And Joel Spolsky, in 2004, summarizing thoughts on pricing and segmentation: https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-duckies/ https://www.joelonsoftware.com/2004/12/15/camels-and-rubber-...

noelwelsh 6y ago

I think it is worth noting that some of the more surprising results in the behavioural economics literature have failed to replicate. A quick search will find many articles discussing this. I believe there is definitely a strong core in behavioural economics, but the especially "pop science" experiments (e.g. people walk more slowly when primed to think about old age, which IIRC is in "Thinking Fast and Slow") should be taken with a grain of salt.

2T1Qka0rEiPr 6y ago
This is fair criticism from what I've seen too, though for passers by I'd just say that it shouldn't necessarily entirely discredit the field. What particularly interests me, is the "nudge" applications which have been adopted by govts. over the past number of years. Whilst most of their plans miss, the ones that stick are incredible, such as the setting of defaults to drastically increase organ donors and improve pensions and investments.
- Kosirich 6y ago
  Was about to make similar comment about connection with behavioral economics and how we should be wary of certain claims. Also there is some strong criticism of applying nudge theories on complex systems. That being said, as you point out as well, some nudge techniques do lead to beneficial results (for all) and I think it's important to recognize (and econs. point out) that if you design a UX, process, building, gadget ect. you are by definition what they call a choice architect. Side note: I was fascinated how much design/choice/nudge thinking is considered here in Denmark. It's very noticeable in design of public buildings and govt. webservices
- nostromo 6y ago
  I’m not sure I want the government opting me in to programs any more than I want Google opting me in to things that may not be in my best interest. If dark patterns start working their way into government, god help us all.
  - okintheory 6y ago

mojuba 6y ago

Tricking the mind though can lead to higher churn rates (poorer retention rates) later. Most people do realize what the true value of their purchase is sooner or later - it might take a few cycles, e.g. monthly subscription payments to make the right conclusions. You might have a spike in your revenue figures now but you might see deteriorating retention indicators a few cycles later. In other words some (many? all?) "tricks" work only in the short term. In fact some of your users will leave your platform with the negative aftertaste of having been tricked.

coderintherye 6y ago

His follow-on book: "The Upside of Irrationality" is also a great read.

mdoms 6y ago
It's almost the exact same book. I felt ripped off having bought both.
- sokoloff 6y ago
  You sound like an ideal customer for his next book: The Downside of Rationality./s
- sharker8 6y ago
  He should release a mini ebook for free. To capture the irrational value we place on free stuff, of course.

bobosha 6y ago

Isn't this known as the Decoy effect? Having a middle tier makes the pricing more palatable.

xondono 6y ago

I've been very interested in the behavioural economics field in general, but for some reason I always find that Ariely tends to jump too fast to conclusions. Most of his experiments I read about have other explanations that fit the data just as well. For instance, the "The Economist" subscription has another explanation to simple comparison, choice deferral. People don't really know if they'll want the online or print version, so are happy to pay extra for not having to make that choice now. If you only give them the two choices, you force them to choose. I'm not saying he is wrong, just that I miss him considering other alternatives (that to me sound way more plausible, but are less publication-sexy).

ced 6y ago
I don't get your argument. Those who are in "choice deferral" and chose online+print in the first experiment ought to have picked the same in the second experiment, but they didn't.
- xondono 6y ago
  If you make me chose right now between online and print, I need to think which of those suits me better, will I read on my phone? Would I rather have the physical thing and have some rest time from the screens? If there’s an easy to pick offer bundling the two, I’d rather pay the extra to keep the choice open, that is, to choose later.
  - theplague42 6y ago
    But that's not what happened! When the print-only option was removed, people switched to the cheap online-only option. I recommend you re-read the description of the study.
mekoka 6y ago
Regarding choice deferral, perhaps you should take another closer look at that experiment. It seems to me that you may have missed the fact that the choice that was taken away is not "online + print", but rather "print only", which yielded 0 subscribers in the original batch.

nate 6y ago

If you're a fan of Dan's, I just realized recently he has a board game out! https://irrationalgame.com https://irrationalgame.com

kwhitefoot 6y ago

There is nothing irrational in seeing the right hand orange circle as bigger. It even says so in the text: "depends on context". The word irrational in the tile is just clickbait.

vaidhy 6y ago

I was originally fascinated by this book and others like it. During the course of my reading, I stumbled upon Gerd Gigerenzer and I learnt a different interpretation. In short, most of these experiments assume full information is available to the testers and make an argument about rational process. As such, their applicability in real life is small, in specific edge cases. The question we should ask and answer is that, in a world of partial, incorrect and misleading information, what is the most rational judgement to make? And that mostly matches with how we behave.