An Evaluation of 'Predictably Irrational' by Dan Ariely

What group in Ariely's classes did the best on their papers? (see the chapter on self-control and procrastination) Why did they do the best?

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The class that received fixed deadlines for four, eight, and twelve weeks to submit their papers received the best grades, followed by Gaurav's class that was asked to set its own deadlines and adhere to them. The class that had total freedom to submit at any time they liked was the worst performing of them all. Ariely proves that a dictatorial system of getting things done is most effective, but he also shows that people can set their own targets and perform better than they would have if they had not set the goals in the first place.

This system can be used in the healthcare and banking industry to incentivize people to get regular medical examinations for disease prevention and to save more money and avoid making extraneous purchases. Like the class that received dictated deadlines, people perform better when their freedoms are tightly controlled on savings and spending. Giving incentives forges the middle ground between tightly restricted freedoms and total freedom.

What is the endowment effect (the high price of ownership)? Why does it take place according to Ariely?

The endowment effect predicts that when people own something they begin to value it more than other people do. This phenomenon takes place in two ways. At the point when a person is planning to purchase a product, their mind bombards them with all the great things they could do with it, creating some sort of a close emotional bond with that item. The online virtual bidding example best illustrates this scenario. After acquiring ownership, people often create numerous happy moments with their possessions, forming an even stronger emotional bond. This contributes to the exorbitant pricing of things like vehicles, houses, and other personal properties.

What were the results of the door game? (Chapter on "Keeping Door's Open) Why are these results significant?

The door game was meant to show the relationship human beings have with opportunity cost- the idea that they are missing out on something by sticking to another or simply by making a decision. It showed the inherent proclivity of people to want to keep their options open to avoid missing what might be a better reward than they are getting in the present. Our desire to keep our options open affects all areas of our lives, including dating, purchasing, and investing.

The significance of the door game and its illustration of people's desire for choice is important because it shows how much energy we waste in attempting to increase gains in whatever activity we are engaged in. The game's portrayal of human beings' fear of missing explains why people often choose the worse of two options simply because they are afraid of missing out.

How do expectations change our behavior? In your answer explain the results of Ariely's beer study with vinegar.

According to the study by Ariely with beer and vinegar at MIT, people's perceptions of their experiences are generally shaped by their expectations. In other words, if we expect something or some experience to be good before experiencing it, it will most likely turn out to be good upon happening. The converse is true for an expectation of negative outcomes. Ariely used beer standard beer (Budweiser) and MIT Brew, which contained two drops of balsamic vinegar to test the students' preference for the two drinks in one case with prior information about the balsamic vinegar and in others without foreknowledge. The foreknowledge served as the expectation for the taste of the MIT Brew. Students who knew about the presence of balsamic vinegar in their drink expected it to taste bad, and so it did. Those who drank the MIT Brew without knowing it contained vinegar liked it just as well as the standard beer. What's more, people who were given the choice to add vinegar into their drink after drinking it blind accepted the invitation with the reasoning that having tasted it once, it couldn't possibly be bad the second time around.

How does price influence the impact of placebos? Why does this happen?

In matters placebo, higher prices or cost of acquiring something give the thing more value and makes people feel more satisfied after using it. Even in medicine, complicated procedures, even the ancient concoctions that used extremely rare ingredients, heal people not because they actually work, but because the patients think that they do. The reason for this occurrence is that placebos work on the power of suggestion. The kind of suggestions our minds receive may make things happen in a particular way even when the prevailing circumstances do not add up.

According to Ariely, why is it that when people are able to cheat they only cheat a little bit?

Ariely postulates that people care about honesty and endeavor to be honest, but their conscience is only pricked by 'greater' crimes and not the smaller ones that can be perceived as being less 'harmful'. Therefore, even with an opportunity to cheat and the security of no chances of being discovered, many people find the middle ground between honesty and dishonesty and just cheat a little.

When people were first asked to recite the Ten Commandments, what happened to the cheating? Why? Why don't we have a real honor code at Pace? It seem like it works in Ariely book and we know that people need constant reminders of being honest. In your answer explain how we could get an honor code passed at Pace.

When test subjects in Ariely's study on cheating were asked to recite the Ten Commandments, they did not cheat at all. Their answers were in tandem with those of the control group that had no opportunity to cheat in the experiment. The reason for this observation is that their moral compass and ideals on honesty were bolstered by their recitation of the Ten Commandments. An honor code works best when it is founded on a universally respected source, such as the Bible, Quran, etc. Pace, with its multi-religious community of students, lacks such a universal base for an honor code. To pass an honor code, Pace authorities should establish a powerful, neutral basis such as belief in God, quest for success, exemplary existence, etc.

In the film, Dis(Honesty): The Truth About Lies, Walt talks about the financial fraud he committed at MCI as simply moving numbers on a spreadsheet. How does DISTANCE FROM MONEY - and things like credit cards and electronic transactions - make it easier for us to misbehave financially?

Misbehavior depends on the guilt a person feels from engaging in a particular activity. Guilt, on the other hand, depends on the justifiability of one's actions. If a person cannot justify their actions, they feel guilty and are more likely to steer away from such acts. When one is stealing through other means other than physically lifting something they ought not to take without permission, the guilt is more because the actions cannot be explained away as innocent. In paper trail such as that which Walt was engaged in, the actions of thievery can be explained easily without the person feeling any guilt. A good case in point is Walt's explanation of his actions as 'simply moving numbers on a spreadsheet'.

Why is it that we would be generally happier if we wrote down our order for dinner (or beer) than announce it to the waiter?

When we announce our orders aloud to the waiters in a group, the natural tendency is to order something that sets us apart from other people on the table. People are wont to make orders of meals and drinks they wouldn't normally order, or ones that are not as attractive, simply because they feel choosing something someone else had chosen would reflect badly on them. Writing the orders down allows for the diners/drinkers to express their individual orders without the social pressure to avoid copying others.

Why are there free lunches in reality-based economics (behavioral) but not in standard economics?

In standard economics, the theory postulates that there are no 'free lunches' because if they were there, another person ought to have found them already and exploited their value, leaving them not free. Behavioral economics believes in free lunches on the basis of people being gullible and susceptible to outside influences to accept experiences that do not give them the highest profit and best experience at the lowest price -the definition of 'free lunches'.