DAN ARIELY

Updates

October 19, 2016 BY Dan Ariely

It’s a simple statement but it represents so much more than just four words. For many people, it is a rallying call for closing the gap between men’s and women’s wages, ultimately achieving the goal of pay equity, and protecting a notion of basic fairness.

Others question the very idea of what equal work means, with some people arguing that women make different career choices compared to men and that any gap is merely a reflection of those choices. But in the United States, there are many historical examples of inequality affecting women including: denial of property rights, the right to vote, the ability to obtain higher education, and barriers to particular occupations and specialized careers.

screen-shot-2016-10-19-at-10-21-37-am

Given the complex history of women’s equality in the U.S., we wanted to find out what people think about the current state of working women and their pay relative to men. We focused on the gender wage gap for topic 2 of Fair Game?, our new app that asks users what they think about the world as it is today and what they would want in a fair world.

screen-shot-2016-10-19-at-10-17-50-am

Surprisingly, people tend to overestimate the gender wage gap and believe women earn 73% of men’s income. In reality, women are estimated to earn 79% of men’s income.

How much do people think women should be paid in a fair world? 93% of men’s income.

blue

Overall, responses did not dramatically differ by the age of the user.

picture2

How does your own gender relate to what you think about this? Male and female users both overestimated the magnitude of the gender wage gap, with men thinking women currently earn 74% of men’s salaries, and women estimating that they earn 70% of men’s salaries.

There was closer agreement for the question of what a fair wage gap should be, with males preferring 93% and females preferring 94% of men’s salaries. On the whole, both genders perceive a gap to exist in the United States and would substantially – but not completely – close that gap in a fair society.

picture3

And can we observe differences in views according to political beliefs? People who identify as conservative and those who identify as liberal only differed by 4% in terms of what they believed the gender wage gap to be, and 3% in what they thought it should be in a fair world. Conservatives estimate women’s salaries to be 76% of men’s, while liberals put that percentage at 72%. In terms of what they think would happen in a fair society, conservatives consider 91% and liberals consider 94% to be a fair ratio of women’s to men’s income. Despite these relatively small differences, on average, the increase in women’s salary thought to yield fairness would be 15% for conservatives vs. 22% for liberals.

The gender wage gap is a topic that deserves careful consideration. Although a single number represents an average for all women, the number varies substantially once we consider factors including race, age, education, profession, career trajectory, childbirth status, and U.S. state of residence, to name a few.

There is also likely to be some gender role stereotyping at play in the results we received, with many of our respondents probably assuming that the burden of childcare would or should fall disproportionately on women.

This is a complex topic, but we can learn from some efforts to equalize opportunities in the workplace for women. A program in the Canadian province of Quebec provided an interesting natural experiment, demonstrating that subsidized daycare could support an upsurge in employment of women that in turn boosted economic output to a level that more than paid for the childcare subsidy costs1.

A final consideration is how long it will take to close the gender wage gap, given the progress that has already been made. One measure of improvement (the upward trend since the 1960’s), predicts the gap to close by 2059. But if a recent slowdown in the trend persists, the gap would not close until 2152. What other efforts do you think might be worthwhile to pursue to help close this gap, sooner or later?

And please join us and play along by downloading Fair Game? from iTunes or Google Play.

screen-shot-2016-10-19-at-10-15-38-am

  1. Fortin, Pierre et al. (2012). Impact of Quebec’s Universal Low-Fee Childcare Program on Female Labour Force Participation, Domestic Income and Government Budgets. Sherbrooke: Research Chair in Taxation and Public Finance, University of Sherbrooke.

 

 

 

October 17, 2016 BY danariely

Inequality is an important topic and one that politicians and scholars spend a lot of time thinking about. But what does the general public think about inequality and the many ways it manifests in daily life? And how do factors like age, gender, or political leanings relate to our views on inequality?

Those are the questions we are exploring with Fair Game?, our new app that asks users what they think about the world as it is today and what they would want in a fair world.

We’re asking users about 13 different topics related to inequality, from wage gaps to opportunities for education, and will be sharing our findings every few days now through mid-November.

Please join us and play along by downloading Fair Game? from iTunes or Google Play. We’ll release a new question every few days until we get through all 13.

You can think about the first topic right now.

fairgraphicpart1

So far, the data show a consistent knowledge gap.

fairgraphicpart2

Our users estimate that the average CEO’s pay is equal to 151 average worker salaries. In reality, the average CEO makes the same as 303 average workers combined. What do people think CEOs should be paid in a fair world: the same as 72 average employees combined.

We also found some interesting patterns in what people think.

fairgraphicpart3

Younger people estimate the ratio of CEO pay to average worker pay to be larger than others do, and also think a larger ratio is fair. Perhaps younger people have lower salaries and therefore think the average worker’s salary is lower? Or they are looking ahead to larger, CEO-like salaries in the future, and that influences what they think is fair?

What about gender?

fairgraphicpart4

It is notable that males and females arrive at the same number for what would be fair (72 average worker salaries for each CEO), but differ in what they think currently exists in the world (158 for males vs. 140 for females). Perhaps the gender wage gap influences the perception of what salaries are in the world?

And political leaning?

fairgraphicpart5

People who identify as conservative and those who identify as liberal give similar estimates of what the current CEO to average worker salary is (149:1 and 152:1, respectively). But political leaning makes a big difference in what people think what would be fair.  Liberal respondents believe 63:1 would be fair, whereas conservative respondents believe that 93:1 would be fair.

It is encouraging that political leaning does not dramatically change our respondents’ perceptions of the world. Both conservatives and liberals underestimate the magnitude of executive pay relative to worker pay in the United States. But their differing assessments of what would be fair suggests that conservatives and liberals might choose different approaches to reducing the executive-to-worker pay ratio.

Executive compensation is by no means a simple issue. In fact, the 2016 Nobel Prize in economics was awarded to researchers who considered how motivational factors should be related to pay, bonuses, stock compensation and the timeframe of company performance in order to achieve optimal levels. One of the winners, Bengt Holmström, told a reporter after hearing he had won, that he thought executive bonuses were “extraordinarily high” and compensation contracts were too complicated.

Has it always been like this? The ratio of executive pay to worker pay was 20-to-1 in 1965, when CEOs earned an average of $832,000 annually, compared to $40,200 for workers (adjusted for today’s dollars). In 2000, the number peaked at 376-to-1, and has since settled back down to the recent level of 303-to-1 (and some estimates are as low as 216-to-1).  This increased ratio means that CEO compensation has risen dramatically over the past few decades, but the average worker compensation has not. In 2014 the average CEO made $16,316,000 compared to the $53,200 made by the average worker.

In an effort to promote greater transparency, the Securities and Exchange Commission will soon require every publicly traded company in the United States to disclose this ratio. A recent bill proposed in the California Senate calls for instituting a sliding scale of corporate taxation, with companies paying different tax rates based on their ratios and sharper increases for those with CEO to average worker pay ratios greater than 100-to-1. Other proposals for reducing the ratio and social ramifications of large gaps in companies include greater profit-sharing across employees and a more consistent relationship between (long-term) performance and bonuses.

fairgraphicpart6

October 15, 2016 BY Dan Ariely

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

___________________________________________________

Dear Dan,

My wife and I recently had our first child. We know that friends and family, especially grandparents, like to buy gifts for children for birthdays and holidays. But we have set up a college savings account for our child and would much prefer to have our loved ones put money into this account rather than buy things that our child doesn’t really need. How can we encourage this more rational behavior?

—Kyle 

Though giving money is often more economically efficient than giving stuff, the feeling of social connection that we get from gift-giving is higher when we give something tangible. If I were you, I would try to provide the gift-givers with a chance to do a bit of both. You can ask them to buy something small for your child and also to put some money in the college fund.

If you want an even higher proportion of the money to go to the college fund, buy a nice book with blank pages and on its cover write your child’s name and the word “future” (“Dan’s Future,” for example). You can then ask each gift-giver to put money in the college fund and, at the same time, to share some advice for life by writing on one page of the book. This way, there will be a physical reminder of their gift (the book and the advice), but more of the money will go to the college fund.

___________________________________________________

Dear Dan,

I am trying to stop using Facebook because it only wastes my time and makes me feel bad about myself. But despite repeated attempts to stay away from my Facebook page, I keep coming back to it. I think part of the reason is that I’m so impulsive. Do you have any advice on how I might finally break my Facebook habit?

—Maryam 

My recommendation is to create some sort of “Ulysses contract.” As you will recall from Homer’s ancient tale, Ulysses knew that if he allowed himself to hear the tempting calls of the Sirens, he would follow them and in the process kill himself and his crew. So he asked his sailors to tie him to the mast of his ship and put wax in their own ears. Ulysses thus protected himself from temptation by making it impossible to take action when temptation appeared. He didn’t have to summon his willpower to resist.

Maybe you can make your own Ulysses contract by asking a friend to change your Facebook password and not to tell you what it is for a month. This will give you a chance to see what life without Facebook feels like and to decide if that is indeed what you want. If it is, you can then go ahead and delete your account—and you will be free of Facebook.

___________________________________________________

Dear Dan,

I hate waiting for anything. I get very impatient when I have to wait for food in a restaurant, for my new iPhone, for the next time I will meet a good friend, etc. Is there anything I can do to make it less painful to wait?

—Maya 

Sometimes anticipation can be a pleasurable part of the experience. Imagine, for example, that you could get a kiss from your favorite movie star. Would you rather get the kiss in the next 30 seconds or in a week? When faced with this question, most people prefer to wait because, in the end, a kiss is just a kiss, but waiting for a unique kiss can be wonderful. My advice is that you try to get into such a mindset for other experiences as well, and instead of thinking about waiting as a delay, think about it as an opportunity for anticipation.

P.S. I got this question from you a few months ago, and I hope that you enjoyed anticipating my response.

See the original article in the Wall Street Journal here.

October 13, 2016 BY danariely

At the Startup Lab (my incubator at Duke University’s Center for Advanced Hindsight), we aim to empower early stage startups to build better consumer health and finance products by teaching them how to apply both the findings and methods of behavioral economics to their products and business models.

SL_Logo1While the in-depth Startup Lab program is limited to a small group of startups that go through our rigorous application process, it would be an injustice to not share some of its lessons with the greater community. So I’ve collaborated with +Acumen to create an online course to help social entrepreneurs make an impact – by designing products that change consumer behaviors for good. But what I am most excited about is the lesson on experimentation. I am always getting questions about how startups can experiment within their small companies (with few resources, especially time), and this course provides the tools for entrepreneurs to take a systematic approach to experimentation.

Sign up for my Master Class with +Acumen on Changing Customer Behavior, now available here: http://bit.ly/2e11cOZ

dan_ariely_master-class-launch

 

October 9, 2016 BY danariely

What is fair?

According to Merriam-Webster:

: agreeing with what is thought to be right or acceptable

: treating people in a way that does not favor some over others

: not too harsh or critical

Many people can tell you when something is NOT fair (especially children, who test this concept more thoroughly than any scientist could)! Injustice may be an easier phenomenon to spot in the world (especially when we are the victim or perceived victim).

Does society view what is right or acceptable through a single lens, or does an individual’s unique background and experience shape their perception of fairness? In our new app, you can join in by answering questions about aspects of life in the United States. Do you think the world that we live in is fair? What should the world look like? Give your opinions and be a part of this large-scale social expression. You may  learn something about yourself and about society. And you’ll help us answer the question, “Is life for everyone in the United States a Fair Game?

 

To download for Apple:

https://itunes.apple.com/us/app/fair-game/id1138020713?mt=8

 

To download for Android/Google:

https://play.google.com/store/apps/details?id=com.advancedhindsight.fairgame

October 1, 2016 BY danariely

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

___________________________________________________

Dear Dan,

Many insects are edible, nutritious and even tasty, and they are consumed by millions of people world-wide. But when I try to eat one, I cannot get past the idea that bugs are, well, gross. Why?

—Zach 

For many in the West, thinking about insects, not to mention eating one, evokes a powerful feeling of disgust. Psychologists often think about disgust as a sort of mental immune system, a deeply ingrained emotion that we have developed for evolutionary purposes to help us avoid pathogens, poisons and other pitfalls. You can even observe disgust in babies when they narrow their nostrils, constrict their lips and close their mouths while trying to expel or reduce contact with a potential contaminant.

So how could you get over your revulsion here? One option would be intensive immersion with insects. You could perhaps spend a week surrounded by pictures of them and then spend the next week locked in a room with nothing to eat but bugs.

Another less extreme option: Buy some insect powder and ask a friend to sprinkle it randomly into your meals, without your knowledge, and only tell you the next day which ones contained insects. Once you realize that the food still tasted good, your disgust should decrease.

___________________________________________________

Dear Dan,

A recent study in the Journal of the American Medical Association found that for many young adults, using a personal monitoring device may not help them lose weight. Should I stop using my Fitbit?

—Nati 

When people start an exercise regimen, they often gain weight. The main reason: After we work out, we feel that we deserve a reward, such as a few scoops of ice cream. These extra calories can exceed those that we burn during our workout. I suspect that a similar phenomenon occurs when we wear tracking devices: We see that we’ve walked 10,000 steps or stood up 12 times during the day, and we feel justified in celebrating our amazing achievements. And of course, when we fail, we don’t feel that we need to deprive ourselves—so either way, it’s easy to wind up putting on pounds.

Still, you shouldn’t stop tracking your behavior. It is important to your health to understand when and how you become more or less active. Measurement can motivate you to become more active. And at the same time, you can work to discipline yourself not to expect a “reward” for hitting your daily targets.

You might also change the way that you measure success. What if, for example, you defined success not by making it to the gym on a particular day but by making it there on at least 80% of the days in a month—and only reward yourself when you clear that bar? If you move to such a system, I predict that tracking your health will work for you.

___________________________________________________

Dear Dan,

Like many of my friends, I love Tinder. The dating app provides a slideshow of potential romantic partners, and if two people “like” each other, Tinder tells them that they matched. How can such a simple app with so little information be so effective?

—Denise 

When we think that we’re compatible with someone, we behave accordingly. A few years ago, the dating site OkCupid told users who had been rated only a 30% match for each other by the site’s algorithms that they were actually 90% matches—and these users ended up liking each other more. In Tinderland, when both people learn that they “like” one another, their expectations change, the match seems more appealing, and the power of self-fulfilling prophecy takes over.

See the original article in the Wall Street Journal here.

September 17, 2016 BY danariely

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

___________________________________________________

Dear Dan,

I’m a freelance copywriter. I like not having to hold a regular day job, but I never get performance assessments, never learn what I can do better, and never know why people stop hiring me. So to improve my performance, I’ve been thinking about sending my clients a short survey about the quality of my work. But I worry that if they’re forced to think about it, they might say, “Hmm, she’s not actually that friendly” or, “Hmm, her work is just average”—and stop hiring me. What do you think?

—Dana 

Ask for the feedback. You might lose some clients in the short term, but the surveys should help you improve your work in the long term.

The trickier question is how to ask for feedback in a way that minimizes negative perceptions about your work (and maybe even spurs your clients to see your work more positively). You can do this by asking your clients to list 10 ways you could improve your work.

My guess is that your clients will easily find one or two ideas for how you could perform better, which will be useful feedback. But after that, they will find it increasingly difficult to come up with pointers until, perhaps at suggestion five, they will run out. By then, they will start thinking, “I can’t find many things wrong with this copywriter—so she must be great.” By creating the expectation that there should be 10 ways to improve your performance and having them come up well short of that, you incline them to think more positively about your work.

___________________________________________________

Dear Dan,

At my school, in an effort to discourage teacher absenteeism and tardiness, we’ve instituted a carrot-and-stick system: Teachers gets a monetary reward if they are on time every day of the week, but if they are late on even one day, they lose a corresponding amount from their wages. Does this system make sense? Do you think it will work?

—Miriam 

Yes and no. Assuming that the reward money is a substantial amount, the teachers will probably try hard to be there on time. On the other hand, since you’ve made the reward all-or-nothing (perfect attendance or a penalty), your teachers are also likely to experience the “what the hell effect.”

Imagine, for example, a teacher who was late for class on Monday. What will be his or her motivation for being on time for the rest of the week now that they’ve missed the mark on perfect attendance? Less dedicated educators may well shrug and start showing up late on purpose. I’d predict that teachers will start each week trying to be punctual, but once they slip, they’ll give up completely. You would probably be better off with a less punitive approach that is more compatible with a learning environment.

___________________________________________________

Dear Dan,

I’m an excellent cook who’s planning to host a gourmet, home-cooked meal for about 10 people. I’d like to use the pay-what-you-want method. So what’s the best way to ask for the money? Should I ask people to pay up front or at the end, and should it be in public or anonymous?

—Labanya 

Based on the principle of reciprocity, you should ask for the money at the end of the meal (when people will know how good your food was). I would give people envelopes with their names on them at the end of the evening and ask them to put their payment inside. This way, your guests will be accountable to you but won’t know exactly how much their fellow diners paid. Have fun.

See the original article in the Wall Street Journal here.

September 11, 2016 BY danariely

This time a discussion with Erica Reischer about parenting.

Link to the podcast

September 6, 2016 BY danariely

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

___________________________________________________

Dear Dan,

My 19-year-old son has Asperger’s syndrome and is incapable of lying. He tends to see the world in absolutes and struggles with white lies. We have urged him to sometimes compliment people to spare their feelings, but he thinks it’s important to be brutally honest. He says, “What if you praise somebody’s ugly drawing and they then try a career as an artist? Why tell somebody that their new haircut looks great when you could warn them that they will be teased about it?” Have you looked into the ways that dishonesty may be different for those on the autism spectrum?

—Bill 

I wrote a book about dishonesty and lecture frequently about it. Over the years, many parents have come to me after a talk to tell me about children who just can’t lie—and the children usually turn out to have some form of autism. Recently, I brought this up with Murali Doraiswamy, a professor of psychiatry and behavioral sciences at Duke University, who confirmed that many children on the autism spectrum do indeed have a hard time being untruthful.

This is caused, he added, by the trouble they have with what specialists in the field call “theory of mind”—that is, the basic ability to put ourselves in somebody else’s shoes and empathize with their perspective. Most of us are able to ask ourselves, “How would that person feel if I told them that their haircut is unflattering or that they smell?” Many young people with Asperger’s don’t tend to think this way, so they often don’t develop the habit of telling white lies for reasons of politeness. They don’t learn to dial down unnecessarily hurtful truths to spare another person’s feelings.

My view is that social politeness often acts as training wheels for more serious lying, so children who don’t understand white lies often don’t develop the ability to lie on a larger scale—which may not be such a bad thing. Maybe we should try a president who has Asperger’s?

___________________________________________________

Dear Dan,

If human beings were tools, which tools would we be?

—Kelly 

The best analogy for describing human nature is a Swiss Army knife.

First, it is useful for many different tasks. Second, the Swiss Army knife gives us a lot of tools, but none of them (no offense to the Swiss) are that great. The knife is small; the screwdriver is hard to use; the can opener is OK but time-consuming to operate. And third, everything we do with a Swiss Army knife takes some time—we have to figure out which tool we want, find it, dig our nails into its little notch and yank out the desired tool.

Together, these features echo human nature: We aren’t really ideal for anything and can be a bit slow to get going, but we can do a decent job on many different challenges.

___________________________________________________

Dear Dan,

What is the most important attribute to look for in a long-term romantic partner?

—Ed 

Low expectations. Much of our happiness depends on relativity—on comparing what we have with what we expected to have. In long-term relationships, we’re bound to be disappointed at some point. But if we adjusted our expectations, we might be pleasantly surprised from time to time.

See the original article in the Wall Street Journal here.

August 20, 2016 BY Dan Ariely

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.

___________________________________________________

Dear Dan,

I was recently at a barbecue restaurant where the toilets were private but the sinks were out in the open, in a common space. Would moving sinks to public areas get more people to wash their hands? Would you recommend this setup for all public bathrooms?

—Brian 

Absolutely, and here’s why.

Sometimes, to show the extent of our irrationality, I will ask a large group, “In the past month, how many of you have eaten more than you think you should?” Almost everyone raises their hands. “In the past month, how many of you have exercised less than you think you should?” Again, everyone raises their hands. “In the past month, how many of you have texted while driving?” Almost everyone raises their hands.

Then I ask, “In the past month, how many of you have left the bathroom without washing your hands?” The result: almost perfect silence, no hands raised and, after a few embarrassed seconds, a bit of nervous laughter.

Obviously, they are lying—but why won’t people who have just confessed to something as reckless and stupid as texting while driving admit that they sometimes don’t wash their hands? I suspect that it is because we care pretty intensely about not being disgusting to others. As such, putting the sinks somewhere public and visible should encourage more hygienic behavior—ideally, with our friends and relatives watching over us to be extra-sure we do the right thing.

___________________________________________________

Dear Dan,

I hear the phrase “keeping up with the Joneses” a lot. But is there good evidence that we really care about what our neighbors have or that we change our behavior accordingly?

—Michelle

Yes and yes: There is good evidence of our tendency to try to keep up with those around us. In one recent paper, the economists Sumit Agarwal, Vyacheslav Mikhed and Barry Scholnick looked at the neighbors of lottery winners and discovered that they tended to buy more cars and other clearly visible assets. These “signaling purchases,” the study suggests, were influenced by the presence of suddenly rich neighbors, but the researchers found no increase in the savings or other invisible assets of the less lucky neighbors. Depressingly, those living near lottery winners were more likely to suffer financial distress and even bankruptcy.

These results show that our decisions aren’t just influenced by what we desire but also by our social drive to keep up with those around us. So it makes sense for us to spend a bit more time thinking about who we want to befriend and live next to. If we are going to try to keep up with the Joneses, we should pick the right Joneses.

 

___________________________________________________

Dear Dan,

The polling averages now show Hillary Clinton with a significant lead over Donald Trump. Will these favorable polls help or hurt her?

—Josh

The forces here point in both directions. On the one hand, you can imagine that people who support the front-runner could say something like, “My candidate is going to win anyway, so I can stay home”—which obviously hurts their candidate. On the other hand, a candidate’s popularity could well reinforce itself and create a herding effect, which would help whoever is up in the polls.

Which of these two forces is more powerful? The evidence points to the herding effect: For better or worse, we just seem to like to follow.

See the original article in the Wall Street Journal here.