After you polish off your apple crumble dessert with ice cream, as the night is drawing to a close, you rock back in your chair and say: “thanks Delilah, that was a magnificent evening – how much do I owe you for the dinner and the experience? Will $100 cover it?”. The food is outstanding, you’ve been getting given drinks all night, you had great conversations and lots of hearty laughs with your family.

Say you go over to your mother-in-law’s on a Sunday night for a delicious roast dinner. Some of the common flaws in our decision making and some of our irrationalities are outlined by Dan Ariely, such as: the difference between social norms and market norms, anchoring and relativity determines our decision making, without the right systems in place it’s almost guaranteed that we’ll procrastinate on our tasks, the idea of ‘free’ does crazy things to us, we overvalue the things that we already own, and we often neglect opportunity costs. We made decision that don’t serve our own interests, but we make the same incorrect decisions over and over. Thankfully though, we’re not wildly irrational – we’re predictably irrational. Dan Ariely says that we’re very irrational in our behaviour and decision making. Well… when it comes to being rational… we’re not. Without this core assumption, without the guarantee that we can predict what choices a person will make given the options and incentives presented to them, without humans being perfectly rational, then the rest of the ideas of economics kind of fall over. This core assumption that we’re all fully and perfectly rational is kind of the building block for every other economic theory developed since then. The basis of economics is that we human are fully informed entities making completely rational decisions to maximise our personal interests.

Join our ‘Brains Trust’ to get access to hidden bonus episodes: Want to win 48 books? Enter the competition: Grab a copy of Predictably Irrational here: ‘The hidden forces that shape our decisions’ This is an absolutely phenomenal book with wide-ranging applications. He shows how we are influenced by things like comparisons, arousal, price, ownership and our own expectations.

More than that, Dan recognized that we are irrational in very PREDICTABLE ways – we all make the same kinds of mistakes. In many cases, we’re very IRRATIONAL: we make decisions that aren’t in our own best interest. But, as Dan Ariely points out, we’re NOT rational. They use this to form all of their economic theories and models. Economists start with the assumption that all humans are fully informed, rational decision makers.

Dan ariely irrational game