Tax Season is here and cheating is in the air. We are all trying to find receipts, and figure out what we can reasonably claim as deductions. Did we end up talking about work last summer when we invited our co-workers for a BBQ?

Let me tell you about an experiment we did at MIT on cheating with some unsuspecting students. (more…)

Clinton recently suggested that if she wins the Democratic primaries, she would select Obama as her vice president. Was this a good move on her part? How should Obama have reacted to this? (more…)

Dear Irrational –

Our daughter graduated from college last winter and decided to move back home until she found a job. She is bright and full of potential. However, she is having trouble deciding on what kind of career she should pursue. Her problem is not that nothing interests her, it’s that she is interested in too many things and is having trouble deciding which path she should choose.

While my husband and I love her and are happy that we are able to support her, we are becoming frustrated with her indecisiveness. She has gone on several job interviews but is reluctant to accept any offers for fear that she’ll make the wrong decision.

What advice can you give us that might help her make a decision?

Thank you,

J. H, California
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Can it be that cheating and taking too much risk are related?

We learned that people cheat more when the object of cheating is even one step removed from money. Could it be that when financial tools are more complex it encourages people to take too much risk? It is hard to tell, but I suspect this might be the case.

Tim Harford has a very nice column called “Dear Economist” in which he responds to questions people email him about economics and daily life (and he writes very clever and interesting answers).  

Recently, I started getting lots of email from people with personal questions about kids, illness, jobs and romance — and I would like to propose that if anyone wants their questions about irrationality answered in a public forum (anonymously of course), send them to me (using the link on the right bar), and once a week I will pick a question and do my best to reflect on it on this blog.

Irrationally yours

Dan

The US government is clearly under some pressure to take action in an attempt to stabilize the economy, and as a consequence, recently announced a $150 billion (more or less) stimulus packages that is supposed to rejuvenate the economy and stabilize the market (H.R. 5140 — the Economic Stimulus Act of 2008).

Will the current plan achieve the government’s goals? (more…)

The reactions I get directly from people and indirectly from bloggers to Predictably Irrational are really wonderful, and I am delighted that the book is creating so much interest and discussion. Of course some people have different points of disagreements and other points of view, but this is part of the learning process (and thanks to the discussions and feedback, I am learning a lot). The range of interest in Predictably Irrational is particularly exciting for me. For example this weekend Predictably Irrational was one of the New York Times Sunday Review of Books Editors’ Choice AND it was selected for a discussion in the Sunday service of the Greater Nashville Unitarian Universalist Congregation. What more can I ask for?

Irrationally yours,

Dan

Zubin Jelveh just posted a very interesting blog post relating to Alan Greenspan’s recent piece in the Financial Times.Zubin ends the post by saying:”Just last month, Steve Levitt and John List of the University of Chicago wrote that as neat as the findings of behavioral economics have been over the past two-and-a-half decades, their practical usefulness has remained marginal:

Perhaps the greatest challenge facing behavioral economics is demonstrating its applicability in the real world. In nearly every instance, the strongest empirical evidence in favor of behavioral anomalies emerges from the lab. Yet, there are many reasons to suspect that these laboratory findings might fail to generalize to real markets.

I’d like to add the financial collapse of 2007-08 as Exhibit A.” I am not sure if this is Exhibit A (I think we had a few before), but I do think that it deserves some serious attention and some serious consideration of how to prevent this from happening again. Irrationally yours, Dan

Boston Globe

By David MeheganGlobe Staff / March 18, 2008CAMBRIDGE – We love to be told we’re smarter than we thought we were, but a surprise bestseller by an MIT professor has a less happy message: We’re consistently irrational much of the time. While there’s no cure, there’s hope – if we can learn to outsmart ourselves.more stories like thisThe writer is Dan Ariely, a behavioral economist at MIT and author of the new book “Predictably Irrational: The Hidden Forces That Shape Our Decisions.” It jumped onto The New York Times bestseller list at No. 5, where it remains this week. In worrisome times, we’re eager to understand what makes our economic selves tick. (more…)

By DAVID BERREBY
Published: March 16, 2008 

For years, the ideology of free markets bestrode the world, bending politics as well as economics to its core assumption: market forces produce the best solution to any problem. But these days, even Bill Gates says capitalism’s work is “unsatisfactory” for one-third of humanity, and not even Hillary Clinton supports Bill Clinton’s 1990s trade pacts. 

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