Archive for category Economics

Dan Ariely’s Predictably Irrational, and so are we

Review of Dan Ariely (2008) Predictably Irrational: The hidden forces that shape our decisions Harper Collins. ISBN: 978-0-00-725-652-5

This is a gem of a book: short, engagingly-written and connected both to the science and the policy implications. Ariely is a seasoned bias researcher (he sees himself as a behavioural economist rather than a psychologist) and this book runs through many of the experiments he has been involved in, as well as related research.

Unlike other introductions to bias, such as Sutherland’s Irrationality or Fine’s A Mind of Its Own, this is not a systematic review of different classes of bias but one person’s perspective on some experiments and their implications.

The main thrust of the book, as suggested by the title, is the economist’s idea of rational choice does not describe how we actually behave, because we are irrational in predictable ways (or, as I prefer to call it, biased). I was particularly interested in his attack on supply and demand curves, those central pillars of introductory economics. In place of the economic constructs, you can learn a set of ideas from psychology (e.g. contrast effects; arbitrary coherence; anchoring; “hot state” decisions) which more reliably fit how people behave.

The undermining of homo economicus has a number of implications for how we can live better and happier lives: we cannot leave it to the free market to fix things; we can achieve more by voluntarily restricting our choices; we need to self-police our selves to counter our tendency to rationalise immoral behaviour.

Ariely’s personality comes through as warm, humane and humourous, clearly concerned about the effects of irrational (or immoral choices but optimistic that by being aware of bias we can compensate for it.

I recommend anyone interested in the topic of bias taking this on a long train ride, and taking a lot longer to think about the implications.

My detailed notes on the book: not a substitute for reading it yourself.

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Accepting the Reality of Denial

The term “Holocaust denial” is, I hope, widely understood. It refers to pretend scholarship that challenges the idea that the Holocaust happened. This has no connection at all with Holocaust scholarship. Whereas real historical scholarship examines multiple, converging lines of evidence to assemble a picture of what happened at a particular time, denial takes a tenuous “what if?” scenario and treats it as proven fact, or at least equal to scientific evidence (a useful introduction to this distinction is the first chapter of Michael Shermer’s The Borderlines of Science).

Holocaust denial exists because there is a demand for it. It’s an economic fact that there are people happy to pay for, or otherwise support, validation of their opinions. The better supported a claim is with real evidence, and the more intensely biased people are against it, the more there will be this need to legitimise a contrasting opinion. Read the rest of this entry »

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Capital Punishment and Homicide

Many comparative studies show that capital punishment provides no deterrent whatsoever against murder. However, there are widely cited econometric studies that seem to show that for each person executed, several murders are prevented. Why the discrepancy? Because the econometrics is junk science.

This post originally appeared on the Kewl Doodz’n’Chyx community blog.

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