Reading notes for "Predictably Irrational"

I have been reading quite a few books since I got my kindle last year. Instead of flipping through the pages without remembering anything, I guess it might be good for me to start writing up some notes to reflect upon at a later time.

A book i finished recently was called " Predictably irrational" by Dan Ariely, and it was quite a good read. The title was intriguing and its far-reaching implications were well supported with experimental data. We all know that standard economics assume human-beings are smart, logical and only make rational decisions. But what had been often (if not, always) overlooked was the fact that we can be stupid when it comes to decision makings. Some examples are "why we spend more money than we have; why painkillers that are 50 times more expensive seem to be so much more effective even though they have exactly the same chemical composition of those cheap ones; and why we procrastinate so much when we shouldn't" . All these phenomena were interesting, yet difficult to interpret.The authors had taken a experimental approach to address them in the book. Strikingly, it turned out that these "bad" decisions we make are not random. Instead, they are systematic, and as we repeat them over and over again, the irrationality is thus predictable. It all comes down to a new field referred to as " behavioral economics" which combines aspects of both psychology and economics. The author conducted very simple experiments to illustrate our irrationality. In one experiment, each of the two groups of students at MIT was given two slightly different beers: one is the commercially available budweiser and the other is budweiser with a few drops of balsamic vinegar. The first group of students was given the samples without knowing the fact that one beer was treated with vinegar, whereas the second group was told the difference before they tasted the samples. As you may have guessed, the first group loved the mysterious beer of balsamic vinegar when asked to compare the two samples; however, those poor kids from the second group were disgusted after knowing vinegar was added to their beer and opted for the commercial budweiser.

Many results like this were shown in the book. I dont know about you but they really just blew my mind. We can easily spot out the power of psychology here in our decision making and as demonstrated, we are indeed far less rational than standard economics assumed. I guess the point the author was trying to deliver was not how stupid we can be, but how we can improve upon our decision making skills by knowing the fact we can be irrational.

So, I swear I did not get any money advertising about the book, but I do think it is worth reading. And if you do read it, I hope you find it helpful like I did.