Decisions, decisions, decisions...

Dan Ariely is a behavioral economist, (which sounds like a fascinating job), whose research focuses on decision-making. His experiments demonstrate that emotional states, moral codes and peer pressure affect our ability to make rational decisions. As a result, we don't!

His interest began with a long stay in the hospital, where, as a burn victim, he had to endure the pain of bandage removal. The nurses practiced the quick method of bandage remove (short duration, high intensity) rather than the slow method (long duration, less intensity). Dan wanted to try the slow method, but was unsuccessful in persuading them. The nurses believed they were following the correct model to minimize the patient's pain. Later, when questioning one of his favorite nurses, she speculated that her reluctance to try the slower method was due not only to her feeling that her intuition was correct, but also because the process was painful to her and shortening it minimized her own pain. This irrational decision-making, along with several others at that time resulted in his quest to study what he refers to as our "predictable irrationality".

I've always found default-based decision making to be interesting. One of Mr Ariely's examples: When the DMV's organ donation option is opt-in (check the box if you want to donate), very few become organ donators. When the option is opt-out (check the box if you don't want to donate), most people become organ donators. Why? Because we don't care enough to lift a pencil and check a box? Or perhaps, it's because we do care and when faced with a difficult decision, we allow ourselves to be influenced by external factors... societal norm, recommendation by an expert, expectation of our government, etc...

Now, here's an interesting example of clever advertising and the resultant irrational decisions made by consumers. In an ad for the Economist, the web & print subscription looks like a great deal. Get both for $125, which is the same price as the print subscription alone. But, remove the least popular choice, the print subscription, and present people with the web subscription for $59 or the print & web subscription for $125, and all of a sudden, the $59 web subscription is the most popular choice.

Mr Ariely: "We understand our physical limitations and build around them. If we understood our cognitive limitations as well as we understand our physical limitations, we could design a better world."

Dan Ariely is the author of Predictably Irrational. Check out his website and these fascinating videos:

• TED talk: Dan Ariely asks, Are we in control of our own decisions?
• TED talk: Dan Ariely on our buggy moral code
• Authors@Google: Dan Ariely