The Upside of Irrationality

I have just finished reading and greatly enjoyed Dan Ariely’s new book “The Upside of Irrationality” published by Harper Collins and available in paperback in the UK. As a fan of his earlier work (Predictably Irrational) together with his numerous blogs and podcasts (Arming the Donkeys is available for free download from iTunes), I wondered whether this second book would have much in the way of fresh insights and ideas.

Indeed I put off getting stuck into this book for some months despite placing it immediately on my recommended reading list for students. I shouldn’t have been surprised that Dan’s opening remarks were about procrastination! The remaining eleven chapters generated some terrifically entertaining and many thought-provoking insights. This is a splendid work that is both deeply personal and moving whilst offering revealing insights into the experimental work of some of our leading behavioural economists.

No published work on behavioural traits is complete without a stage by stage attack on the idea of cold, calculating, self-interested maximising agents that have dominated the microeconomics textbooks for generations. Dan’s preferred distinction is between the approaches of the rational and wise realist that was Dr Spock from Star Trek with the flawed and emotional cartoon character Homer Simpson. I’ll be delving into You Tube clips from both TV series in the future when introducing behavioural economics to my students!

Many of the cognitive biases introduced to us in Predictably Irrational make a reappearance this time around - for example the sunk cost fallacy, loss aversion, the endowment effect and herding behaviour.

Dan’s work in this book ranges far and wide - from lessons about what drives genuine meaning in the world of work and the endowment bias of the things that we create (think IKEA furniture and Sunday mornings baking cup cakes) to the power of humans to adapt to changing circumstances and the long-term effects of emotions when decisions and choices are being made. Dan makes a powerful case for investing time and money in experiments ahead of major public policy changes.

Fans of behavioural economics will find this an enthralling read - it is a hard book to put down on a long train journey or flight!

As a rider to this blog post here is a piece from the New York Times on the limitations of behavioural economics. Read: Economics Behaving Badly

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 2 Macro: Evaluation on Supply-Side Policies [21 May 2012]
Revision notes on unemployment [20 May 2012]
Unit 1 Micro: Economics of Cocoa Prices [12 May 2012]
Unit 1 Micro: Economics of a Minimum Wage [12 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 2 Macro: Unemployment Glossary [5 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 1 Micro: The Collapsing Price of Carbon [3 Apr 2012]
Unit 1 Micro: Revision on Producer Subsidies [2 Apr 2012]
Unit 1 Micro: Revision on Producer Cartels [31 Mar 2012]
Unit 2 Macro: Policies to Drive Economic Recovery [9 Mar 2012]
Daniel Kahneman on decision-making [5 Feb 2012]
Unit 1 Micro: Winning the War on Deforestation [5 Feb 2012]
Unit 2 Macro: Videos on Productivity [17 Jan 2012]
Economics at the Movies - Freakonomics [9 Jan 2012]
Unit 1 Micro: Externalities from Metal Theft [2 Jan 2012]
Unit 1 Micro: Biomass Subsidies and Timber Prices [30 Dec 2011]
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry [21 Dec 2011]
Economics of Deforestation [20 Dec 2011]
Prezi on Information Failures [20 Dec 2011]
Unit 2 Macro: Long Term Unemployment - A Human Story [15 Dec 2011]
Unit 2 Macro: Will a Youth Jobs Subsidy Work? [30 Nov 2011]
LSE Lecture: Daniel Kahneman - Thinking Fast and Slow [15 Nov 2011]
LSE lecture: Darwin economy [13 Nov 2011]
Behavioural Economics: Bittersweet Symphony - The Psychology of Food [8 Nov 2011]
Unit 2 Macro: Video Clips on Unemployment [6 Nov 2011]
Unit 3 Micro: Impulses to Change Management Models [5 Nov 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Unit 1 Micro: Is the Sun Dipping on Solar Subsidies? [27 Oct 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Unit 1 Micro: Copper prices and a copper crime wave [10 Oct 2011]
Unit 1 Micro: The Supply and Demand Rap! [28 Sep 2011]
Unit 1 Micro: Drink Driving and Government Intervention [26 Sep 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Behavioural Economics - The IKEA effect [25 Sep 2011]
Study Note - The Basic Economic Problem: Scarcity and Choice [13 Sep 2011]
50% tax rates - Chuck it George [7 Sep 2011]
Unit 2 Macro: Reducing Unemployment after a Recession [11 Jul 2011]
Glastonbury, rain, mud, abandoned tents and negative externalities. [4 Jul 2011]
Unit 1 Micro: Are carbon taxes ineffective? [20 Jun 2011]
Poor Economics - Esther Duflo at the LSE [3 Jun 2011]
AS Macro Key Term: Supply-Side Policies [25 May 2011]
Unit 3 Micro: Monopsony Power in Markets [19 May 2011]
Super-cooperators and Game Theory [19 May 2011]
Unit 3 Micro: Perfect Competition [19 May 2011]
A2 Micro: Innovation Efficiency and Welfare [18 May 2011]
A2 Micro: Ownership and Control in Modern Businesses [18 May 2011]
Unit 3 Micro: Diseconomies of Scale [18 May 2011]
Review of “Adapt” by Tim Harford [9 May 2011]
Dominos Pizza turns to Behavioural Economics [5 May 2011]
AS Micro Revision: Public and Private Goods [21 Apr 2011]
Key AS Micro Terms: Prices [15 Apr 2011]
AS Macro Key Term: Frictional Unemployment [11 Apr 2011]
RES Essay Competition - Obesity and a Fat Tax [7 Apr 2011]
AS Micro Revision: Banana Prices [1 Apr 2011]
The Power of Incentives [31 Mar 2011]
Economics Q&A: Should the CAP be scrapped? [14 Feb 2011]
EU Economics: Hopes for a low carbon future in Europe [3 Feb 2011]
Youth Unemployment in the UK [24 Jan 2011]
Winner of the Fun Theory Competition [23 Jan 2011]
Ariely on Limitations of Rational Economics [23 Jan 2011]
Economics Q&A: What are some of the benefits and drawbacks of a period of rising world food prices [4 Jan 2011]
Trees as private and public goods [3 Jan 2011]
Behavioural Economics - Nudge Squared! [30 Dec 2010]
Behavioural Economics - Public Policy and Behavioural Change [30 Dec 2010]
Behavioural economics links [13 Dec 2010]
Pricing tricks and behavioural economics [12 Dec 2010]
Promising news on deforestation [2 Dec 2010]
Boris’s Bikes - Gearing up for Success? [30 Oct 2010]
The Upside of Irrationality - Dan Ariely at the LSE [27 Oct 2010]
Dan Ariely at the LSE [19 Oct 2010]
Jerome Kerviel and the Principal Agent Problem [5 Oct 2010]
Animating the Ultimatum Game [6 Sep 2010]
Inequality and the risk of financial crisis [25 Aug 2010]
Monkeynomics! [2 Aug 2010]
Casting an eye over pop economics [23 Jul 2010]
Questions in Behavioural Economics - Combatting obesity [30 Jun 2010]
Questions in Behavioural Economics - The Longest Match and Loss Aversion [30 Jun 2010]
Questions in behavioural economics - How can framing be used to influence public decisions? [27 Jun 2010]
Questions in behavioural economics - Why is the placebo effect important? [26 Jun 2010]
Questions in behavioural economics - Why do we engage in herd behaviour? [25 Jun 2010]
Recycling waste - goodbye stick, hello carrot [7 Jun 2010]
Innovation to get the British economy growing again [7 Jun 2010]
Unit 2 Macro: How can supply-side policies help in a recession? [6 Jun 2010]
Housing and the British Economy [5 Jun 2010]
Specific Supply Side policies [5 Jun 2010]
A selection of revision notes on supply side policies [1 Jun 2010]
Why is it so hard to tickle yourself? [25 May 2010]
Unit 3 Micro: Efficiency and Price Intervention in Markets [21 May 2010]
Dan Ariely’s new book - the Upside of Irrationality [21 May 2010]
A2 Economics Revision - Direct and Indirect Taxation [9 May 2010]
The Irrationality of Shaving [2 May 2010]
Issues and Prospects for the UK Economy in 2010 [25 Apr 2010]
Build a Tower - Build a Team [22 Apr 2010]
A Fun Way to Get People to Obey Speed Limits [2 Apr 2010]
RES Essay Competition - Inequality Title [1 Apr 2010]
Behavioural economics - lessons from an ad man [9 Mar 2010]
Climate Crunch - Making the Economics Fit [4 Feb 2010]
Focus on the National Minimum Wage [24 Jan 2010]

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