“How many of you in the last month have not washed your hands when you left the bathroom?” with that question, behavioural economist Dan Ariely struck his audience’s weak point. He was in Groningen last month to give the lecture “The problem of self-control,” and during his hours long stay in the city he took time to talk to The Spoke.
“This question is surprisingly embarrassing, right? It’s amazing, people are more willing to admit that they text while driving than not washing their hands,” he continued.
Behavioural economics is a branch that studies how human irrationality – emotions and unconsciousness– affects people’s economic decisions.
The Duke University professor is the closest to a conventional scientist in the social field. Instead of white coats, though, he didn’t hesitate to dress in a bee costume to make a word game with his field of research initials (behavioural economics, “BE”). Instead of rats his students or any human being are potentially guinea pigs for his experiments, and his laboratory is a set of daily life ventures that propel people’s irrationality.
Here there are the questions The Spoke discussed with Ariely and for the record, he responded with an accurate rationality.
Why are people irrational?
Maybe the biggest reason for irrationality is emotions. They rule our behaviours when nature wants us not to think, but to act. When we have an emotion it takes over.
Emotions 1 – Reason 0.
Even if you look at politics, Trump, Putin, they basically are using fear. And when people are afraid they don’t think.
Historically, nature evoked emotions but now even a supermarket can evoke one.
Is that so easy to knock out humans’ rational brain?
The second cause of irrationality is that modern life require us to think long term but we’re short term thinkers. And the third one is probably money. It is really an amazing invention, it require us to think about opportunity costs. Every time you spend money on one thing, you cannot spend it on something else.
Is it true then, that people are unhappy mostly because they focus more on what we don’t have than what we actually have?
In general people don’t think about alternative options. This is confirmation bias – you have an idea and you only look for data that confirms that idea.
People rarely look for disconfirming evidence or have multiple hypothesis in mind.
Is it bad being so irrational?
Not all irrationality is bad. Some irrationality is about being nice to people, being generous, kind, helpful… voting is irrational. But there’s a lot of irrationality which is terrible.
People usually make decisions based on what they get and what they lose. Awards and punishments are natural triggers for people to react, or it is a question of culture and education?
Rewards and punishments are very basic to human nature. Not all are money or electrical shocks, they can be recognition. Think about Facebook as an example. It’s based on feedback groups and it’s very hard to stop.
A lot has to do with the environment. One way easy to think about is a supermarket or anything else that somebody else is designing the environment.
I am thinking of Ikea stores.
Yes. The environment matters, and the way it is structured will make you make different choices.
Let’s put an example. I’ve won two tickets for the Champions League final match in a lottery. I am not really into football so I’ve decided to sell them. The market price is over 2,000 euros. But I am against this capitalist mindset so I decide to sell them for less than 500 euros. Am I iIrrational, anti-human nature or stupid?
Are you selling it to somebody you know?
Then it’s hard to know if its irrational or stupid.
It’s certainly irrational. In the rational world you don’t care about how you think about yourself. What you are basically here talking about is self-signalling.
I’m not sure I know what it consists of…
It’s the idea that your actions help define to yourself who you are. One of the strongest examples of self-signalling is when you walk through the street and you give five euros to a beggar. You’re not a better person, you are the same. But you feel better because what you’ve proven to yourself is that you’re a better person.
It’s good to know that being coherent with one’s values is not stupidity, then.
The difference with being stupid is that you are a leftist and you would just feel bad for selling your soul to the system for 1,000 euros. So the thought that you have about the fact that you care about how you would think about yourself it’s an irrational thought.
You also say that the 21st century is the century of the economy of knowledge and that this economy works better with Marx than with Smith. Why?
Knowledge workers have a lot of room for what is called goodwill. If you think about professors, students, etc. it’s up to them how much they work, nobody else would know and there won’t be real consequences from the job perspective.
You as a journalist, for example, can do a half fast job and write 800 words in 2 hours or deciding to do more or less in the same time. Would anybody notice?
So this is goodwill, it’s deciding when do you want to stop. When it is up to you, what you care about is meaning and connection and not maximising productivity in an Adam Smith way.
Is that the reason why we have more and more employees working 24/7?
That’s right. So if I pay you by words written, how motivated would you be? Not so much. The employee needs to feel that there’s autonomy and goodwill.
And how do we connect it to Marx?
In the Marx world, you need to feel connected to the outcome of the work to be motivated. So I can get you to jump and pay you to jump, but if I want you to feel passion and motivated, money is not the mechanism.
Can you say it aloud in the USA that Marx is better than Smith?
I think so, not everybody likes it, but yes.
And last but not least, have you washed your hands all the times you have used the toilet during last month?
I’ve just arrived from Kenya, so…
(Ariely delves into his pocket for a while before showing me a hand sanitiser gel.)