In my last post, I review and highly recommend my fellow PT blogger Dan Ariely’s book Predictably Irrational. The book is full of fascinating examples of how actual human behavior – the choices and decisions people make every day – deviates from the predictions of the standard economic theory. The book is entertaining and easy to read. As great as Predictably Irrational is, however, there is one word – a very important word – missing from the book: Why.
This is my major criticism, not just of Ariely and Predictably Irrational, but of the entire field of behavioral economics. Ariely receives the brunt of the criticism because he is simply the best the field has to offer. In the past three decades, since the seminal work of Kahneman and Tversky and their Prospect Theory, behavioral economists have revealed a large number of ways that human behavior consistently and, yes, predictably deviates from rational behavior. Their major findings have been well replicated in many different studies and experiments. In this sense, Ariely and other behavioral economists have catalogued an impressive number of “whats.” Their work has revealed how humans often behave and what decisions and choices they actually make.
But science is not about whats; it’s about whys. Whats are part of science; scientists must sometimes first discover the phenomenon to study. But the ultimate purpose of science is not discovery; it’s explanation. The ultimate purpose of science is to answer the why questions. And that is where behavioral economists often fail. They know what humans do, but they don’t know why they do what they do.
To be fair, in Predictably Irrational, Ariely often does attempt to answer the why questions. In his chapter on the allure of zero cost (why people overwhelmingly prefer something if it’s free but not if it has a very small nominal cost), he speculates: “Most transactions have an upside and a downside, but when something is FREE! we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is. Why? I think it’s because humans are intrinsically afraid of loss. The real allure of FREE! is tied to this fear.” But why do we have such an irrational fear of loss? Why do we fear losing one cent, which forces us overwhelming to prefer free Hershey’s Kisses but not the same Kisses at the cost of a penny each? And, most importantly, the question that has yet to be answered after 30 years of Prospect Theory: Why do humans evaluate comparable gains and losses asymmetrically?
In another chapter on the “endowment effect” (the fact that we demand more to give up our possession than what we are initially willing to pay to acquire it in the first place), Ariely once again speculates on why we exhibit this tendency: “Why? Because of three irrational quirks in our human nature. The first quirk... is that we fall in love with what we already have.... The second quirk is that we focus on what we may lose, rather than what we may gain.... The third quirk is that we assume other people will see the transaction from the same perspective as we do.” But, to me, these explanations don’t go far enough. Why do we have these quirks in our human nature? Why do we fall in love with what we already have? Why do we focus on what we may lose rather than what we already have? Why do we assume other people will see the transaction from the same perspective as we do?
In this sense, I think Dan Ariely and other behavioral economists are like Sigmund Freud. Freud knew that conscious motives for behavior were not the real causes of behavior. He further knew that many of the true (subconscious) motives for behavior might have been sexual in origin. Of course, we now know from evolutionary psychology that he was right. So Freud was on to something; he just didn’t know what, and we didn’t find out until we had evolutionary psychology.
Similarly, Ariely notes: “We usually think of ourselves as sitting in the driver’s seat, with ultimate control over the decision we make and the direction our life takes; but, alas, this perception has more to do with our desires – with how we want to view ourselves – than with reality.” So Ariely knows, like Freud before him, that we are not in the driver’s seat. But then who is? Like Freud, Ariely (and other behavioral economists) are on to something; they just don’t know what (or why).
Perhaps it is not fair for me to criticize Ariely and other behavioral economists for not completely explaining why humans make predictably irrational choices and decisions. It was a significant enough step forward in social and behavioral sciences just to discover that human behavior indeed was irrational and predictably so. There is a clear division of labor in science, and no scientists (or scientific disciplines) can do everything. As I explain in a previous post, however, the principles of reductionism require that all human behavior ultimately be explained by biological and evolutionary factors. Perhaps it is time for evolutionary psychologists to step in to try to explain why human behavior is predictably irrational. It is to Ariely’s credit that we now know that human behavior is predictably irrational. It’s time for us to make it explainably irrational.