Here‘s another great book review by Herbert Gintis. The book: Dan Ariely’s Predictably Irrational. Its biggest flaw:

Ariely is a creative experimenter with zero capacity to deal with economic theory. By accepting the behavioral paradigm (“people are not logical, they are psychological”), he makes it in principle impossible to explain his experimental results. Take, for instance, the wonderful experiment he carried out in a tavern in university town in the USA. Disguised as waiters, and with the permission of the establishment, Ariely and his assistants offered 2 oz. of complimentary beer to clients. There were four types of beer with names that indicated nothing about their taste or quality, and clients at each table were asked to state publically which beer they wanted. He found that clients were averse to making the same choice as others at their table, so for instance, at a table with four clients, each would ask for a different type of beer. This is because, he said, Americans value individuality. He performed the same experiment in Hong Kong, finding that clients tended to choose the same type of beer, confirming that the local culture valued conformity.

This is a great experiment, but where is the irrationality? Is it irrational to value conformity or diversity? I think not. Moreover Ariely stacked the deck in his favor by ensuring that the real qualities of the beer were unknown, so clients should be indifferent among them. This self-serving experimental design (behavioral economics often use self-serving designs without acknowledging this fact in any way—why they get away with it I cannot imagine) was bound to make “culture” trump “preferences,” Why not do the experiment with known beer types? Or better yet, vary the delay in delivering the beer in the four choices… Why not use consumer choice theory to judge the strength of the desire for conformity or diversity, rather than just saying “people are irrational” and attempting no plausible explanation of behavior?

Ariely is certainly correct that behavioral economics has some important things to tell people about living their lives… But, most of the behavior illuminated by behavioral experiments is not irrational and there is no reason for people to change it.

Ariely’s book is still in my queue. What do you think he might say in his own defense?