In Chapter 7 of “Predictably Irrational”, Dan Ariely discusses how once we value things we own far more than any stranger would. Even a simple mug becomes valuable once you claim ownership over it. People create a connection with what they own and familiarity leads us to overvalue our own possessions. This is why the market in possessions is prone to distortions and outright market failures. People selling their possessions will charge a price no potential buyer would see as reasonable. Continue reading “Predictably Irrational Chapter 7 – The High Price Of Ownership”
In chapter 6 of “Predictably Irrational”, Dan Ariely discusses a problem every student is familiar with, procrastination. You have an essay to do yet here you are browsing through facebook, looking at pictures of strangers and comments from people you don’t like. You know you should study but you could watch one more youtube clip. Every night you promise that the next day you will work hard and study, yet you never get around to it. You promise that you will exercise and eat healthy but end up sitting on the couch all day eating pizza.
In Chapter of “Predictably Irrational”, Dan Ariely discusses the importance of social norms in determining our actions and the paradox of how we will do some things for free but not if we are paid. Economics is based on the idea that we are all self-interested and will only do something if we have something (money) to gain. Ariely shows that we are not as greedy and selfish as this depiction describes us and that we are also motivated by social norms that can often be more important than money. Continue reading “Predictably Irrational Chapter 4 – The Cost Of Social Norms”
To a neo-classical economist zero is just another price. To the average consumer it brings the magical connotations of free. We are always trying to get something for nothing so if something is free then consumers impulsively take the option. Ariely shows how this impulse comes with hidden costs that debunk the myth of rational consumers. Whether it’s from eating too much free food or accumulating worthless free pens, clickers etc, people are always trying to get a free lunch. Continue reading “Predictably Irrational Chapter 3 – The Cost Of Zero Cost”
In chapter 2 of Dan Ariely’s fantastic “Predictably Irrational”, he discusses how supply and demand are not the independent forces that drive prices in the market as usually described. Instead consumers are subject to anchoring and arbitrary coherence which nudges them towards higher or lower prices. Our first impressions have a large effect on later decisions so that too an extent, the market drives the consumer not the other way around. As Tom Sawyer discovered, people pay a high price for what is hard to get regardless of its supply or demand curve. Continue reading “Predictably Irrational Chapter 2 – The Fallacy Of Supply And Demand”
Predictably Irrational byDan Ariely is a fascinating and deeply insightful book that is a pleasure to read and full of gems. It is bursting with interesting and ground breaking experiments that completely debunk many of the assumptions of economics. It will reshape how you view economics and how consumers react in real life, as opposed to in economics textbooks. It is a book I would highly recommend and should be considered a behavioural economics classic. In fact it’s so great that I couldn’t fit all I wanted to say about it into one post (or three) so instead I will summarise my favourite chapters (which is most of them) and highlight the important points they make. What is particularly interesting is that the book is heavily based upon evidence and empirical studies, so no claim is made without being backed up. In fact Ariely does most of the experiments himself so you are really hearing it from the horse’s mouth.
Coca-Cola is the biggest brand on Earth. It is not just a drink, it is the symbol of the American way of life and of capitalism. Gallons of it are drunk by almost everyone, it is available in every single shop in the country and it reaches almost every corner of the globe. But I have been boycotting it for about seven years now, ever since I heard about its dark underbelly. Coke may be the symbol of the prosperity of capitalism but it is also the symbol of greed and exploitation. This global corporation has despicable links with the death squads of Columbia. Continue reading “Boycott Coca-Cola”