Thursday, September 9, 2010

Dan Ariely's "The Upside of Irrationality"

This is yet another fun read from Dan Ariely. He talks about his life. He mentions his research partners. You learn about burn injuries. And you learn a lot of very interesting behavioural economics.

In his chapter "The Case for Revenge" talks about revenge as a necessary emotion to help support our sociability. If you don't keep the cheaters honest, you won't have social acts that support an economy of trade which is based on trust. You won't have altruism if every generous act turns the initiator into a sucker fleeced by the more cynical and pathological humans. This chapter talks about a number of lab tests used to tease out aspects of trust and revenge. He also tells his sad tale of a problem with Audi when his near-new car developed transmission problems on a freeway. The fun bit of the story: retelling the story is just more of Ariely getting his just revenge at Audi for failing to support their product!

The book is full of odd insights. As he discusses his painful burn treatment (and the puzzle over whether it is better to do the painful daily bandage removal in one sustained session of pain or to space it out to allow the pain to subside before the next bit of tugging and ripping of flesh) he points out that it movies with commercials are actually experience with more pleasure than a movie with no commercial interruptions. How bizarre. But it ends up we are wired so that it is better to take our pain in one fell swoop, but to interrupt our pleasures so that we can savour them. So movies with commercial interruptions actually increases the pleasure. But, as he notes, he still uses his Tivo to skip the commercials! (So much for applying the lessons of science!)

His chapter on "Empathy and Emotion" points out how deeply irrational we are. We give freely to save one of those poster children from a disaster. But when the Rwanda massacre occurred it was hard to stir any compassion because that was a story of statistics, not a story of individual suffering, personal suffering, that we can relate to. He points out that our irrational impulses end up creating some real economic horrors:
...consider the disastrous oil spill from the wrecked Exxon Valdez. The estimates for cleaning and rehabilitating a single bird were about $32,000 and for each otter about $80,000.
Yes, the response was to rush in and save each and every one of those adorable birds and animals. But what a colossal waste of money! Our emotions said "save them!" but the rational side says "whoa! it makes no sense to spend that much per animal".

The book is full of lively, interesting examples that teach lessons. Ariely has a great gift, a writing style that lets him make his research accessible to the general public. The book is serious, but it reads with a familiarity and wit that make it a pleasure and not a drudge. I encourage everybody to read this an his earlier book Predicably Irrational.

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