I resisted talking about ‘Predictably Irrational’, a book by Dan Ariely, “the Alfred P. Sloan Professor of Behavioral Economics at the MIT Sloan School of Management and director of the eRationality Group at the Media Lab”, when the first wave of columns and reviews appeared about it. I haven’t read it, but it is mining the vein of doing experiments to figure out how people behave.
The title, of course, is not palatable to me. It’s not possible to test rationality. I see why it’s attached to the work that behavioral economists do, but semantically, it’s a real pain. Let me dive right in to this article, direct from MIT News.
“Though Ariely’s book is often compared to the bestseller “Freakonomics”–both certainly share a quirky, hands-on approach to questions of everyday behavior–he says that in fact his research is almost the opposite of that book’s. Those researchers found cases where people’s behavior, even in seemingly irrational contexts, was perfectly rational and followed established economic principles. Ariely’s work, by contrast, shows the consistently irrational ways people behave in situations where traditional economics predicts they would follow a course of rational self-interest.”
Goodness me. Consider the bait taken: what’s ‘traditional economics’ and why is it different from behavioral economics (or are they the same)? What’s an ‘irrational context’? Here’s an example, from the article, of the Ariely book:
“Ariely and his students went around and left six-packs of Coke in randomly selected dorm refrigerators all over campus. When he checked back in a few days, all of the Cokes were gone.
But when he later placed plates of six loose dollar bills in those same refrigerators, not a single bill was missing when he checked back. Even though the value was comparable–and thus the situations were supposed to be equivalent–people responded in opposite ways. Why is that?”
First of all, if I see a plate of loose dollar bills in the refrigerator I’m pretty well out of my comfort zone. Can it be so hard to explain why people don’t take dollars from a plate in a dorm refrigerator? Aside from being a bit silly, it’s the first misperception of economics at work! ‘The value was comparable’. Actually, I’m being unfair: this is worse than the first misperception of economics, because the Coke-dollar game, as reported by the article, is refusing to acknowledge any preferences whatsoever, ignoring, then, the most fundamental building block of modeling in economics. Maybe that’s why it’s ‘not traditional’.
There are other examples in the article, and I’m sure the book is full of interesting experimental results. I can’t get past that title, though, and it, like Freakonomics itself and the cottage industry it spawned, is squarely in the making-economics-look-stupid camp with the Christmas stuff. I’m sure insights from behavioral experiments can be informative beyond the triviality – the Obama advisers come to mind – but the press coverage for this new book has instead reinforced the discipline’s ‘quirkiness’ and furthered, in some small and delightful way, the misunderstanding of economics.