Why are Americans so gloomy? It may be all about the yoked dog and ‘learned helplessness.’

We have a market paradox on our hands. Consumer confidence is close to a 40-year low, suggesting that the economy is in worse shape now than in times that seemed far darker, such as the early 1980s, when both inflation and unemployment crept into double digits. Yet many of the current economic indicators, including inflation and unemployment, are rather positive — or at least not as negative as consumer sentiment implies. (more…)

This is a good time to reflect a bit on the Olympics

What do you think? Who is likely to experience more regret? Someone who won the silver medal in the Olympics, or someone who won the bronze medal in the Olympics? (more…)

Dan:
I heard a portion of your interview on CBC radio (near Toronto, Canada) and was instantly inspired to buy your book, a behavior most uncommon for me. I must say I thoroughly enjoyed it and have shared stories from it with many friends and colleagues. I look forward to its sequel.

So here’s a question you may wish to explore although the irrational behavior may be harder to test since it’s not an immediate response like cheating or making a purchase. (more…)

Joe Windish just wrote an interesting post about Microsoft’s Mojave Experiment

In this post, Joe describes a study carried out by Microsoft on people who hated Windows Vista. The company recruited 140 Mac and PC users who thought Microsoft’s latest operating system was slow, that it crashed constantly, that it was incompatible with various devices, and that installing it would be a pain. None of these people had ever used Vista; they’d only heard from others that it sucked. When they were asked to watch a short demonstration of a brand-new Microsoft operating system called Windows Mojave, the Vista-haters were blown away. (more…)

One of the positive side effects of writing Predictably Irrational is that sometimes people try their own versions of these experiments. Here is one email describing an experiment on cheating and toilet paper – demonstrating the wide range of application of behavioral economics….

Dear Professor Ariely,

I am a fan of your research. I particularly liked your experiments on cheating (i.e. the non-existent “MIT honor code” and 10 Commandments example) and thought that I could apply your hypothesis in an experiment of my own.

I live in a house near the U.C. Berkeley campus (where I just graduated last semester). The house is shared with many housemates, and most of us do not know each other before moving in. Moreover, this summer a bunch of foreign exchange students are also living in the house. This living arrangement has led to a number of problems– namely the stealing of toilet paper. (more…)

AS I stand at the gas station filling my tank, the meter tallies how much it’s going to cost me. At this station, a gallon is $4.26, and as the meter passes the $20 mark, then the $30, I realize that I am paying too much attention to the price of gasoline. I bet you are too.Looking back at my family’s expenses over the past few years, I see big increases in our health care costs and in how much we pay for food. The rise in what we spend on gas is not nearly as extreme as our increases in categories like electricity and telephone. So why does the amount we spend on gasoline feel so enormous? I think it is because of the way we buy gas. (more…)

A few weeks ago I talked at Google.

It was an interesting visit — they are clearly a very cool company — almost as cool as they think they are.

 In case you have nothing better to do, here is the link to the talk itself.

As it turns out (see promotion below), automobile manufacturers are not the only ones trying to entice consumers with free gas — the Shady Lady brothel has just joined this new trend (see a story about this). I am guessing that free gas is effective in getting people to buy cars — at least relative to direct discount — but I am wondering what is the sense in discounting brothel related services. Perhaps it is meant to give people the feeling that their drive to and from the place is free!

From a standard economic perspective, gifts are a waste of money. Imagine that you invite me over for dinner one day and I decide to spend $50 on a bottle of wine. There are a bunch of problems: To start, I am not sure what wine you would like the most. And besides, maybe you’d prefer something else, like a book, a DVD, or a blender. This means that the bottle of wine that cost me $50 might be worth, at most, $25 to you. (more…)

Dear Dan,
In 1996 at the age of 50 my wife and I built a new house, which contained everything we always said we wanted to have. It was larger than we really needed since the children had grown and left home.

During the 6 to 8 month building period, we continually made choices and decisions that led to the spending of large amounts of money. In fact, when you are building a house and negotiating with builders and suppliers spending in the thousands becomes a normal part of life. (more…)