Dan Ariely, Predictably Irrational

I finished Dan Ariely’s book on behavioral economics Predictably Irrational: The Hidden Forces That Shape Our Decisions in three days, it’s that easy to read. The subject and style remind me of Freakonomics. I like this one better though, partly because all the chapters revolve around experiments that Ariely took part in himself, but mostly for his engaging and reflective personal touch.

The book leaves me with the impression that behavioral economics is more psychology and sociology than economics, more engineering than science. In any case, Ariely’s insights are certainly eye-opening for this novice, and each useful. But the most memorable moment for me was when Ariely moved away from his experiments and drew on his experience and hopes as an empathic, apparently apolitical Israeli Jew*:

So what about our football fans and the game-winning pass? Although both friends were watching the same game, they were doing so through markedly different lenses. One saw the pass as in bounds. The other saw it as out. In sports, such arguments are not particularly damaging—in fact, they can be fun. The problem is that these same biased processes can influence how we experience other aspects of our world. These biased processes are in fact a major source of escalation in almost every conflict, whether Israeli-Palestinian, American-Iraqi, Serbian-Croatian, or Indian-Pakistani.
In all these conflicts, individuals, from both sides can read similar history books and even have the same facts taught to them, yet it is very unusual to find individuals who would agree about who started the conflict, who is to blame, who should make the next concession, etc…We like to think that sitting at the same table together will help us hammer out our differences and that concessions will soon follow. But history has shown us that this is an unlikely outcome…

Ariely’s prescription is to find a neutral third party “who has not been tainted with our expectations”—useful advice when such a third party is available. In the meantime, setting aside the past and focusing on the present and future may be useful. Just look at East Asia now, giving the lie to the claims of so many experts who placed their bets on the history issues during the Koizumi administration.

* Incidentally, I wonder how often we see the word Israeli being used without an implicit assumption that it actually means Jewish Israeli? For that matter, how often do we see something similar in other ethnic, religious, and cultural contexts? And how does that affect public discourse? It’s probably worth looking into.