|PREDICTABLY IRRATIONAL: The Hidden Forces that Shape Our Decisions
Most people don’t know what they want and don’t know that they want it-until they see it and the reptilian brain kicks in.
“Everything is relative,” writes economist Ariely (Behavioral Economics/MIT), “and that’s the point.” His book, a cousin to Freakonomics and The Long Tail, is a spry treatise on how the world works and how we spend our money based on other people’s rules. Knowing that everything is relative, says Ariely, a merchandiser will display a 19-inch television next to 26-inch and 32-inch models, the prices progressing from $210 to $385 to $580, with the point being to sell the nicely profitable, nicely midsize model first. Of course, because we want more relative to what we have, that merchandiser will hope to see us again, now clamoring for the bigger, more expensive model. Thus the economy chugs along, and thus our credit debt deepens. When the time comes to buy that bigger goodie, then we will respond to an “anchor price” that somehow worms its way into our mind. This is the same anchor price that leads us to think that a four-dollar cup of coffee is acceptable, and after doing it once, we do it again, for we now “assume that this is the way you want to spend your money.” Is it? Maybe not, but people are funny creatures of habit, and it is for all of us that Ariely has a brilliant solution to a problem that is very real: “a self-control credit card that would let people restrict their own spending behavior,” categorically and overall, fixing, say, grocery spending at $200 a week and coffee spending at $75 a month. Fat chance of it catching on, he allows: After all, the credit-card companies make $17 billion a year in interest charges. They know our irrational ways, too. Make a point of seeing this book. That way you’ll know you want it, and you will.