Predictably Irrational

Dan Ariely's Predictably Irrational should be required reading in all English-speaking high schools. Though he is an academic of impeccable credentials (including a 2008 Ig Nobel prize), he is also an entertaining writer—a rare combination. The book details some of his important and cutting-edge research in the emerging field of behavioral economics, but its writing is accessible, clear, funny, and effective.

His examples resonate with the ordinary choices we all make in life: buying magazines, dating, vacationing. He shows us the mistakes we all make, but not in a way that is condescending or cynical. Indeed, his intent is clearly to show us how we can avoid making those mistakes even while he shows us how universal they are. His advice is not that of a college professor or a parent, but more like a best friend telling you “Wow, I just did something really stupid—don't do that.”

Indeed, its very lucidity might be a risk: you might be tempted to think “Well, of course, how obvious” after he explains some aspect of human behavior, and not realize that his discoveries were not obvious, and that they are backed up by solid experimental evidence, not just platitudes.

You can get a taste of his style from Youtube, but the details in the book are worth the time spent. While it is likely that academics will continue to cite the groundbreaking 1974 Kahneman and Tversky paper as the founding work of the field, Ariely's book is likely to be one most discussed by the rest of us, and it will serve you well to be familiar with it when related subjects come up in conversation.

Richer than Croesus

Croesus, an otherwise unremarkable king of Lydia in the Iron Age, was so renowned for his wealth that the expression “as rich as Croesus” survives in our language today. I'm sure his lands and rooms of treasures might impress even some of our own captains of industry. But what is wealth if not the ability to do the things one chooses? In that light, I'd like to compare his wealth to that of a typical American: me, a poker floorman at a small casino.

Croesus Receiving Tribute from a Lydian Peasant, Detail, Claude Vignon, 1629

Croesus Receiving Tribute from a Lydian Peasant, Detail, Claude Vignon, 1629

The king's chefs prepared feasts for him from the fruits of Lydia's fertile soil, along with game and livestock. He probably enjoyed a few fruits and spices from foreign trade as well. But it is unlikely that he could even imagine the fabulous wealth of my diet: I enjoy garden-fresh fruits and vegetables from around the world every day, even throughout winter. My cupboard stocks more exotic spices than his chefs knew existed. I could choose every day to eat meat, or fish, or fowl of staggering variety and high quality. And all of this in quantities that make obesity more of a risk than hunger.

The king surely enjoyed the entertainments of his day. But he could not boast, as I can, of having thousands of the world's greatest musicians and dramatic players perform in my home on a whim. Any of thousands of beautiful women dance for me after a momentary download. The world's greatest athletes compete for my entertainment every day. He was also known for seeking the company of the great philosophers of his day. Not only can I read the writings and hear the speeches of great philosophers, but I can exchange ideas with many of them any time I choose in the electronic forums of my day. My library is more vast than any he could have imagined: about 1000 books on paper and a about a hundred more on a tablet I can carry with me that allows me to get more magically from the air.

Lydians were legendary horsemen, and the king's stables were doubtless large, but the hundred horses in my garage can carry me hundreds of miles to visit distant family and friends in speed and comfort the king would have found unbelievable. If I choose, they could carry me to a port from which I could travel to the most distant point on the globe in a day—a feat he would have considered magical. If I choose not to travel but to stay in the year-round comfort of my home, I can send unlimited messages to those family and friends without depleting my stables and receive replies in less time than it took the king's messengers to mount. I can even hear their voices and speak to them directly without having to command them to travel to me.

The king had physicians to tend to his health, but they were impotent compared to those I command. Thousands of his subjects died from afflictions that are treatable or even curable today. Today, his deaf son might have a cochlear implant. If he chose not to, he would be taught to sign and read and speak by teachers that would make his handicap a mere nuisance. My friends boast of broken legs as learning experiences; the king would have told of his soldier's broken legs as reasons for their death.

Even something as simple as physical safety was a luxury in Croesus's time, and in the end his command of armies was not sufficient to prevent the takeover of his kingdom. I have even greater armies sworn to protect me and my fellow citizens from such threats, and they have done a remarkable job.

What made all these riches possible? Science, technology, trade: in a word, progress.

Poker is a classic zero-sum game. Every dollar I make at the table is a dollar someone else lost. Many people make the mistake of thinking that the economy, or life in general, is that way too. But trade is a positive-sum game, even without advances in science and technology: this is Ricardo's law at work. When I spend the dollars I've won on groceries, I, the farmer, the grocer, the trucker, the tractor manufacturer, the grocery store's builders, and many others are all a little bit better off: everyone gains, no one loses. Add the progress of invention to the mix, and life becomes the massively positive-sum game that allows you and me to be richer than Croesus.