Dan Ariely. Predictably Irrational: The Hidden Forces That Shape Our Decisions. HarperCollins. 304 pages. $25.95
Ori and Rom Brafman. Sway: The Irresistible Pull of Irrational Behavior. Doubleday. 224 pages. $21.95
Richard H. Thaler and Cass R. Sunstein. Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University. 293 pages. $26.00
When the late philosopher Sidney Morgen-besser was asked by a waitress whether he would prefer apple or blueberry pie for dessert, he chose apple. Upon her return to the table, she amended the dessert menu to include cherry pie, prompting Morgenbesser to revise his decision. “In that case,” he replied, “I’ll have the blueberry.” Morgenbesser’s change of heart in this famous story seems unquestionably absurd, largely because it is at loggerheads with most conceptions of rationality. Rational decisions, according to some views, are the ones that upon reflection will effectively allow us to achieve our goals. If you are late for a wedding and need to be there on time, it’s rational to take the shortest, most efficient route to the ceremony, and not some out-of-the-way scenic path. If you are determined to lose weight and become healthier, it’s rational to forgo the fructose-drowned short stack you enjoy each morning and, instead, make do with half a grapefruit.
It’s this capacity of ours to reflect on our goals and decide on strategies for their achievement that, since Aristotle, has been identified as a defining characteristic of the human animal. And, accordingly, many of us tend to think that although we are prone to occasional lapses in judgment, rationality is the basis for most of our actions. Those in the nascent field of behavioral economics, however, are challenging this assumption, arguing that the typical human decision-maker is more Morgenbesser than we’d like to think. That is, oftentimes irrelevant factors exert undeserved influence on our decisions.
This central insight of behavioral economics has been seen by some as a paradigm-shifting breakthrough in understanding human action and by others as merely an asterisk next to economic assumptions that should still be understood as, by and large, accurate. Dan Ariely’s Predictably Irrational: The Hidden Forces That Shape Our Decisions argues that the former view is more correct and that the discoveries of behavioral economics should force us to adjust our traditional understanding of the dismal science, if not turn it entirely on its head. With evidence garnered from shrewdly conceived social experiments, Ariely hopes to poke irreparable holes in the picture of human beings as cold utility-maximizing calculators.
In each of his thirteen chapters, Ariely, a professor of behavioral economics at Duke University’s Fuqua School of Business, exposes a different irrational tendency to which human beings regularly succumb. His main means of economic inquiry isn’t a priori theorizing or mathematical modeling, but rather real-life experimentation. Ariely believes that much of contemporary economics has been undone by a reliance on faulty assumptions that present an inaccurate account of human behavior. By recording how people really act in a laboratory environment given certain prompts, stimuli, and instructions, Ariely hopes to set economics straight by replacing its basic simplifying assumptions — most notably the assumption that humans are perfectly rational actors — with more nuanced empirical data.
His results are sometimes quite astonishing. In one noteworthy experiment, for instance, participants were asked to complete a puzzle wherein they had to unscramble a sentence whose words had been rearranged. The twist was that some participants were given sentences containing phrases having to do with money like “high-paying salary” while others received “neutral” sentences that contained no references to money or payment. Astonishingly, the content of the sentences — a completely irrelevant detail — had a dramatic effect on the participants’ behavior. Ariely observed that those in the “salary” group “were less willing to help an experimenter enter data, less likely to assist another participant who seemed confused, and less likely to help a ‘stranger’ (an experimenter in disguise) who ‘accidentally’ spilled a box of pencils.”
Experiments like this one showcase the ability of Ariely’s work to uncover aspects of human behavior that could not have been anticipated from the armchair. That the words batting around in our mind at any given moment can so predictably influence our behavior is indeed eye-opening. One can easily extrapolate from this example and imagine how the opinion column you read this morning, or the conversation you just had with your stockbroker, can affect how you behave in consequential ways, accentuating certain parts of your personality while deemphasizing others.
This is a stirring insight, and it should force us to question how firm a grip we have on ourselves at any given time. But, alas, these kinds of revelations are too rare in Ariely’s book. As he explains in his introduction, his intentions are to inspire us to “fundamentally rethink what makes [us] and the people around [us] tick.” But this highfalutin mission statement undermines the book’s potency by preparing the reader for a work of wondrous elucidation, when what he provides is mainly a catalogue of unremarkable human propensities dressed up in experimentally corroborated new garb. College men, he reveals in one chapter, are more prone to reckless behavior when sexually aroused. Signing an honor code prior to taking an exam, another experiment suggests, will make you less likely to cheat (isn’t that why we sign honor codes?). And yet another set of experiments makes clear that we are susceptible to procrastination.
Many of the experiments Ariely has constructed to capture these phenomena in action are artfully designed, and his observations are undoubtedly worthy and informative. But the assumptions that the author sets out to upset are not as deeply ingrained in the mind of the general reader as they might be for some economists. His goal for the book is to overturn the notion that “we know all the pertinent information about our decisions, that we calculate the value of the different options we face, and that we are cognitively unhindered in weighing the ramifications of each potential choice.” But that view is burdened with so many absolutes that no fully honest individual would ever profess it without at least a qualifying “for the most part.”
As for Ariely’s other stated intention, to “modify standard economics, to move it away from naive psychology (which often fails the test of reason, introspection, and — most importantly — empirical scrutiny),” he comes up short again. Nowhere are there any serious suggestions for how economic theory as it currently exists should remake itself to accommodate Ariely’s discoveries. Predictably Irrational might have benefited from some background on the state of economics today, the role that the “rational man” picture plays within the discipline, and the kinds of changes that Ariely’s work is attempting to catalyze. Instead, he brands his work as momentous without providing context within which that proclamation is meaningful.
Ori and rom Brafman’s Sway: The Irresistible Pull of Irrational Behavior, a slimmer, more modest volume, covers much of the same ground as Predictably Irrational, but is less intent on ushering in a new era of economic theory. In fact, we get no indications that Ori and Rom Brafman — an organizational expert and a practicing psychologist respectively — are interested parties in any kind of academic turf battle. With a handful of well-chosen, stranger-than-fiction style anecdotes, the Brafmans explain how various irrational tendencies, or “sways” as they call them, have played a causal role in everything from Lyndon Johnson’s Vietnam strategy to the bipolar disorder epidemic of the late 1990s.
The Brafmans have a knack for pairing these various sways with examples that are not easily forgotten. The story of violinist Joshua Bell, for instance, is an ingenious vehicle for illustrating how crudely we sometimes assign value. In 2007, virtuoso violinist Joshua Bell participated in an experiment conducted by the Washington Post. Bell stood on the platform of the L’Enfant Plaza Metro station in Washington, D.C., wearing street clothes and playing Bach’s Sonatas and Partitas for Unaccompanied Violin. Amazingly, commuters on the crowded platform paid him little attention. In this example, due to a sway that the Brafmans call “value attribution,” the commuters failed to notice that they were hearing a flawless performance of one of the most technically demanding pieces of violin music ever composed being played on a Stradivarius violin worth over $3 million. Instead, the commuters “attributed the value they perceived — the baseball cap, the jeans, the subway venue — to the quality of the performance.”
Sway is a colorful examination of the many odd choices and actions that constitute society, conveyed through cocktail-party-ready anecdotes told with style and clarity. Predictably Irrational, although instructional and at times fiercely absorbing, can sometimes remind one of being caught at a faculty reception chatting with a guest who is a bit too eager to discuss his own research.
The most high-profile discussion of behavioral economics and its implications, however, is Cass Sunstein (now head of the White House Office of Information and Regulatory Affairs) and Richard Thaler’s Nudge: Improving Decisions about Health, Wealth, and Happiness. Few books on policy create as large a splash as Nudge did, and it’s no surprise. Sunstein and Thaler are two of the most distinguished academics writing today, and Nudge purports to be an ambitious treatment of some contentious policy issues.
While the other two works aimed at elaborating on the simple point that human beings are irrational actors, Nudge takes this as a starting point for a much more ornate argument in favor of a new approach to public policy the authors call “libertarian paternalism.” Unlike the draconian state interventions that we normally associate with paternalistic policies (alcohol prohibition, trans-fat bans) libertarian paternalism, the authors tell us, is a “relatively weak, soft, and nonintrusive type of paternalism because choices are not blocked, fenced off, or significantly burdened.”
Sunstein and Thaler hope to achieve this delicate balance between nanny-statism and minarchism with a nifty new public-policy tool: the nudge. Traditional paternalism usually makes use of strictly-enforced rules that require by penalty that we act in a certain way perceived by some rule-making authority as being beneficial for us. Nudges, on the other hand, are ways of merely making it more likely that people will act in a certain manner.
Nudges are administered by altering what the authors call “choice architecture.” This term refers to the manner in which options are presented. To use the simplest example, a restaurant can nudge you towards ordering healthier foods by designing their menu such that flapjacks and hash browns are tucked away in some obscure corner, while half-grapefruits and steel-cut oatmeal are well-advertised. In this example, the menu-designer, according to Sunstein and Thaler’s terminology, would be the “choice architect” — a truly unsettling title — and his strategy for encouraging healthier eating habits would be a nudge.
The virtue of a nudge is that it accomplishes the same basic goal as a more robust rule or ban, but without forcing anybody to act in any particular way. Individuals are free to order the flapjacks at no additional cost to themselves, and so autonomy is maintained. In this way, by stripping traditional paternalism of its distasteful and unattractive aspects, Sunstein and Thaler hope to restore the idea that governments, businesses, and various other institutions can be justified in shepherding us towards more advantageous modes of conduct (politely, though, and with respect for our feelings).
It’s difficult to deny that libertarian paternalism has some appealing applications. Indeed, we gladly benefit all the time from well-designed choice architecture when Amazon anticipates which books we might like to purchase and displays them on its front page for us to see. Amazon is essentially nudging us towards books we are likely to enjoy. And, of course, it’s tempting to ask, if we’re going to have a complex federal drug benefit anyway, why not nudge people towards enrolling in the plan that’s best suited to them?
One could endlessly debate the merits of each individual use of nudge-style policy, but the most pressing question for people who possess a considered distrust of paternalistic policies is this: Does Sunstein and Thaler’s new idea save paternalism? That is, does it salvage those aspects of paternalism perceived to be beneficial, while removing features that are obviously unacceptable?
Not really. It’s unclear how Sunstein and Thaler’s newfangled paternalism avoids the most damning criticisms that have, for years, been deployed against regular old paternalism. I’m thinking, in particular, about objections most commonly associated with John Stewart Mill. In On Liberty, Mill argues against paternalism on the grounds that the state is usually ill-equipped to make good decisions on behalf of individual citizens. Government decisions, Mill writes, “must be grounded on general presumptions: which may be altogether wrong, and even if right, are as likely as not to be misapplied to individual cases.” On this view individuals should be left to choose for themselves how to act, not because they are inherently incapable of making poor decisions, but rather because they are, as a rule, better-informed than outside parties about the circumstances surrounding their decisions.
This is hardly a knockdown argument against Sunstein and Thaler, but it is a concern that any twist on paternalism worthy of the libertarian label should be able to handle. The closest Sunstein and Thaler come to dealing with this kind of reasoned opposition to their argument is in their occasional invocation of the “Just Maximize Choice mantra.” This view, according to the authors, is based on an “abstract preference for choice” which dictates that, regardless of the issue, the solution that will always produce the best results is the one that gives individuals the most freedom to decide for themselves how to act. At the heart of this doctrine, Sunstein and Thaler explain, is the misguided belief that “governments are inherently incapable of doing anything right.” But this is a caricature of arguments, like Mill’s, that advance a principled objection to paternalism. By exaggerating to the point of absurdity what most would understand as a healthy skepticism in the government’s capacity to make decisions for its citizenry, the authors avoid engaging what is potentially one of the most damaging arguments against their new movement.
Indeed, why is it that Sunstein and Thaler believe that government decision-makers are less susceptible to the “biases and blunders” they describe than people who happen not to be employed as “choice architects”? One could argue that a federal Office of Libertarian Paternalism staffed only with thinkers as discerning as Sunstein and Thaler could be defended, but, if instituted, such a government agency could easily end up being run by employees that lack the intellectual honesty and attention to detail that would be required for such a system to function satisfactorily. Before arming them with such an effective means of guiding citizens’ behavior, shouldn’t the possibility that this power will be misapplied or even abused be given due consideration?
The authors do conclude that “we should be worried about all choice architects, public and private,” but they answer this concern with a plea for more transparency in government, proposing that we ask “government officials to put all their votes, earmarks and contributions from lobbyists on their Web sites.” It’s downright bizarre that, after empowering government officials with the colorless, odorless nudge — a tool for influencing the actions of potentially millions of people without their knowledge — the authors’ only proposed check on that power is disclosure of campaign contributions. One needn’t be a “Just Maximize Choice” fundamentalist to find this reply insufficient.
One central mistake that all three books make in varying degrees is to treat humanity’s failure to live up to homo economicus’s example as a tragedy, or at least a crisis in need of management. It seems likely that more harm than good will come from any organized movement aimed at stomping out irrational behavior wherever it is found. And, although the research discussed in these three books does sometimes paint a grim picture of human understanding, it also offers hope that, having identified our cognitive deficiencies, we as individuals are better situated than ever before to overcome them.
