Behavioural Economics

Professor Dan Ariely is a marvellous man. If you’ve not heard of him, or read any of his material, or heard him speak then I urge you to head over to YouTube immediately and look him up. Prof. Ariely was involved in a horrendous car accident as a youth which left him with terrible burns all over his body. He spent many, many months in hospital having painful bandage-changing procedures each and every day to encourage regrowth of skin. He had plenty of time to think and watch people and the way they behaved. He became fascinated with human behaviour.

The nurses performing his bandage changes used the “short sharp” method of bandage removal that we are all familiar with from parents removing plasters/band-aids when we were children. But was this method proven to be better than slow, gradual removal? Sure, we know it’s conventional wisdom – so it must be right? Prof Ariely actually discovered that the short sharp method caused more pain and distress than the slow method, so how come these caring, wonderful people had chosen to repeatedly use a method that inflicted more pain? This was one of the mysteries that led Prof Ariely to the world of behavioural economics –  the study of the effects of social, cognitive and emotional factors on the economic (and other) decisions of individuals and institutions and the consequences for market prices, returns and the resource allocation.

Professor Ariely’s book: Predictably Irrational is a fantastic book looking at the various reasons why we do behave so irrationally in so many circumstances, and why these irrational behaviours occur in a predictable fashion. You’ll learn a lot about yourself, those around you, and business decisions by reading the book. It’s thoroughly entertaining too – I’ve read it about 20 times, and still enjoy it now.

In this fantastic presentation, Prof Ariely gives a delightful overview of what behavioural economics can show us and how predictably irrational we all are!