Big Think Interview with Dan Ariely | Big Think

Big Think Interview with Dan Ariely

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A conversation with the author of “Predictably Irrational” and professor of behavioral economics at Duke.

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Dan Ariely:

Dan Ariely is the James B Duke Professor of Psychology and Behavioral Economics at Duke University. He is the founder of The Center for Advanced Hindsight and co-founder of BEworks, which helps business leaders apply scientific thinking to their marketing and operational challenges. His books include Predictably Irrational and The Upside of Irrationality, both of which became New York Times best-sellers. as well as The Honest Truth about Dishonesty and his latest, Irrationally Yours.

Ariely publishes widely in the leading scholarly journals in economics, psychology, and business. His work has been featured in a variety of media including The New York Times, Wall Street Journal, Washington Post, Boston Globe, Business 2.0, Scientific American, Science and CNN.

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TRANSCRIPT:

Topic: Defining behavioral economics

DAN ARIELY: Behavioral economists are interested in the same topics that economists are interested in: why people buy, how we make decisions, what are the right mechanisms in the market, and so on. But the starting point is different. Rather than assuming people are rational and then taking the implications of that, we have no prior beliefs. We say, let’s just see how people behave. Let’s put them in a situation in the lab, in the field, let’s see how they behave, and then as a consequence let’s make the implication, and because in those situations people often don’t behave rationally, the implications are often very different from the implications from standard economics.

Topic: Humans are out of control.

Dan Ariely: So there’re many, many examples for irrationality. There’s one way to be rational and many ways to be irrational. We exhibit lots of those. A good way to think about it is to think about emotions. So think about it. Imagine if you were in the jungle 20,000 years ago and you saw a tiger, what do you want? You want a human being in that situation to stop, to pause, to think, to take out their little Excel spreadsheet and calculate: What should I do? Should I run? Should I stay? What’s the cost, what’s the benefit? Of course not. What you want is to create a situation in which this person runs as fast as they can the moment they see the tiger, and that’s basically how emotions work.

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When we see something that puts us in danger or had to do something with our sexual behavior, we turn our cognition off. It’s not that we think and we feel, we just feel. Emotion takes over and then they just execute the command, say, run as fast as you can, don’t think, don’t calculate, don’t do anything. Now, emotions still work in the same way these days even though we don’t have tigers, but now they’re evoked by other things. Somebody cut in front of us in the highway, we have some anger towards somebody, somebody in customer service upsets us, all kinds of other things happen. Emotions just work in the same way, even though nowadays they’re not as relevant to those situations.

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Question: Can we train ourselves to act rationally?

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Dan Ariely: There is hope, and I think that hope basically has kind of multiple legs to it. The first thing is that I’m hoping that when people see a mistake that they know about it they might be able to fix it. So for example it turns out that “free” is a very big allure, when we see something that is free we often go for it even if it’s not good for us. But it turns out that if it wasn’t free, if it was costing us a penny, or 10 cents, or a dollar, we will not have the same allure to it.

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So one of the suggestions I have to people is, when something is free, ask yourself, would I still do the same thing even if it was costing me a penny, or ten cents? It’s a range of those things. There’s a range of things in which we can read a paper, or book, or kind of have an idea about what are some irrational behaviors of other people are exhibiting and of course it’s always easy for us to see what other people are exhibiting irrationalities, and then use it as a mirror, and say, oh I can see this behavior. I see that when I date, I juggle too many options; I see that when I shop I make this mistake. I see when I make these mistakes and let me think about how to prevent it. That’s the first hope.

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