Misbehavioral Economics

I have unforgivably neglected to link to yesterday’s episode of Free Will featuring a discussion with Dan Ariely, the Alfred P. Sloan Professor of Behavioral Economics, about his new book Predictably Irrational: The Hidden Forces that Shape Our Decisions. I really enjoyed talking to Dan, who is incredibly creative in experimental design. It is good fun reading about the experiments, but I found Dan frustratingly naive about the implications of many of his findings, as I vented here.

I’m pretty sure Dan is guilty of the the fallacy of asymmetrical idealization, and I think he falls victim to a number of confusions common among behavioral economists that are inevitable when you completely destroy the formal neoclassical economic model of rationality but insist on using it as a benchmark of rationality anyway. (I discuss this at greater length here.) But like I told Dan in the diavlog, I’m totally on board with the project of finding out how we actually do make decisions, which is obviously of the first importance. His extremely valuable work is clearly at the cutting edge of that effort, and Predictably Irrational is well worth reading, if only to get a good sense of some important (and perplexing) recent findings.

Author: Will Wilkinson

Vice President for Research at the Niskanen Center