August 1, 2010

THERE IS NO HOMO ECONOMICUS:

Trust Your Irrationality (Jamie Holmes, 7/31/10, Daily Beast)

Whereas people tend to underperform on tasks if they’re being watched, we learn, roaches actually exhibit the same behavior, botching tasks when there is a roach spectator, suggesting the primordial roots of ordinary stage fright. Ariely shows readers how large financial incentives may actually diminish performance, and how and why people value their own pet ideas disproportionately over others’. (Tellingly, even having to unscramble a 10-word sentence led people to value the idea it expressed as highly as if it were their own, implying how linked cognitive effort and evaluation often are.) He explores how we derive meaning in the workplace and the intricacies of trust and revenge, empathy and love, and even online dating.

Pushing back against one of the central ideas of neoclassical economics, that people “will always choose to maximize their reward while minimizing their effort,” Ariely draws our attention to a fascinating case study. In the 1940s, when ready-made baking mixes were introduced, marketers were puzzled as to why mixes for biscuits sold well but cake mixes didn’t. A psychologist, Ernest Dichter, speculated that people wanted to feel that they’d made the cake themselves. If consumers had to add fresh eggs, he guessed, it might simulate just enough of that pride of creation. Sure enough, when dried eggs were removed from the mix, sales skyrocketed. Looking for the easiest path too often, Ariely points out, can deprive us of the deeper sense of pleasure associated with overcoming even small challenges.

Ariely’s chapter on adaptation may be his most arresting. Just as people’s eyes adapt to light, our miseries and ecstasies adapt, too. One problem with this “emotional leveling out—when initial positive and negative perceptions fade” is that “we do a relatively poor job anticipating either the extent or the speed” of the adaptation. Human beings cannot stay too high or too low for that long, and we adjust to new (pleasurable or painful) stimuli more quickly than we expect. It means that people should spread out their self-indulgent purchases rather than splurging, extending the overall joy by allowing adaptation to settle us back to our equilibrium each time. As Ariely playfully explains, it also implies that hot-tubbers should take frequent breaks. By re-encountering the everyday air, we’ll savor the renewed plunge.



Posted by Orrin Judd at August 1, 2010 7:36 AM
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