Dan Ariely is a behavioral economist at the Massachusetts Intitute of Technology and author of the best-selling book, Predictably Irrational (HarperCollins, 2008). In recent years, he has demonstrated that random digits can influence bids in an auction, that sexual arousal leads to reckless decisions (at least in college males) and that brand-name aspirin is more effective at treating headaches than generic aspirin, even when the pills are identical. Mind Matters editor Jonah Lehrer chats with Ariely about his research.
LEHRER: You are a cognitive psychologist by training. What led you to become interested in behavioral economics?
ARIELY: What motivates me the most is trying to take what we’ve learned from cognitive psychology and apply it to real world problems in an attempt to improve the way we live. The interesting thing about economics is that it has become the main guiding principle for policymakers, lawmakers and businesses. My hope for the kind of work I do, and for behavioral economics in general, is that by augmenting standard economics it could help design better policies that actually work with what people can compute and the ways they reason. In particular, I think that this approach in behavioral economics can have a substantial impact on savings, health care and a tendency to engage in risky behaviors.
LEHRER: Many of your experiments have direct connections to everyday decision-making. Do you get the ideas for these experiments from your own life?
ARIELY: Yes. Most of my experiments begin as a way for me to investigate and gain a better understanding of my own behavior or the behavior that I observe around me. I also get many ideas from talking to people and from current events. For example my fascination with cheating began with Enron and my current research on mortgages started with the sub-prime mortgage crisis.
LEHRER: You've documented many ways in which people are "predictably irrational." Are there certain irrational behaviors that have particularly surprised you?
ARIELY: At this stage not much surprises me anymore. But perhaps the most surprising is the fact that many people, particularly economists, believe that we are perfectly rational.
LEHRER: If you could only give someone a single piece of advice for dealing with his or her irrational brain, what would it be?
ARIELY: To try to remain aware of our irrationality in situations where we have a strong tendency to act irrationally. This is easier in situations where we have a history of acting irrationally. For instance, since we are all realizing that we’re not saving enough for retirement maybe it is time to take action and force ourselves to behave better. One way to do this is by having money automatically transferred from our checking account into a retirement savings account at the beginning of each month—essentially taking the decision outside of our consideration so that we don’t even give ourselves the opportunity to think about spending money that we know we should save. As a result of putting such plans in action, our behaviors will coincide with our intentions.
LEHRER: What future research projects are you most excited about?
ARIELY: The two big fields I want to apply my research to next are financial savings and health care. In health care I am interested in figuring out how we can get people to eat better and take preventative health measures that will hopefully lead to early diagnoses. In financial savings I want to find ways to get people to improve their reasoning about financial decision-making and create more habitual savings.