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Since his student days, Ariely has applied his restless curiosity, and his imaginative powers, to all kinds of research questions. Soon after he started at MIT, he and a colleague mulled over the sort of questons that might be conjured up in a traditional pub—all of which meant that they would be justifying to MIT accountants a $1,400 bill for beer as a research expense.
In the guise of a waiter, Ariely took beer orders at the Carolina Brewery in Chapel Hill. He found that those who made their choices out loud, in the standard way that food is ordered in restaurants, ended up less satisfied than those in a second group, who ordered privately, writing down their choices after being shown a menu rather than taking their lead from others.
There are other avenues to satisfaction, some of which hinge on what the individual is led to believe about a coming attraction (or non-attraction)—the findings of another beer-suffused experiment. Ariely, working with Lee and another colleague, showed that an advance message can shape the eventual experience. A group of students didn't find vinegar-spiked beer all that bad. That indifferent feeling changed, for the worse, when they were told, before gulping it down, that the beer had a nasty taste.
This winter, as the buzz around the book was building, Ariely received widespread media attention for a study showing that a ten-cent pill doesn't kill pain as well as a $2.50 pill. That may not sound surprising, but in fact, the pain-numbing pills were identical placebos. With his collaborators at MIT, Ariely recruited eighty-two volunteers and told them that they would be testing a new pain drug, "Validone." It was actually a placebo. Following a standard protocol, each of the subjects received light electrical shocks on his wrists and was asked to provide a rating, from "no pain at all" to "the worst pain imaginable."
Then it was time to pop a "Validone." Half of the subjects were given a brochure telling them that it cost $2.50; the other half a brochure telling them that it cost a dime. They then received a second round of shocks. In the high-price group, 85 percent of the subjects reported feeling less pain from the same voltage after taking the pill. In the low-price group, 61 percent said the pain was less—a significant drop-off. Ariely's experiment was another illustration of the power of expectation: We simply expect better results from more expensive medicines—the placebo effect at work.
Ariely's expectation is that behavioral economics will influence public policy. "From the standard economics perspective, you should just give freedom to people. People are reasonable, sensible. They always make the right decision. Just give them the freedom and flexibility to choose what is best for them." Behavioral economics, though, sees individuals as tempted by emotion, susceptible to mistakes, and not particularly far-thinking. So we need mechanisms and institutions—mandatory health check-ups, for example, or forced retirement savings from 401(k) plans—to promote behavior that's ultimately self-interested. That might be a prescription for a more paternalistic society, Ariely acknowledges.
At MIT, Ariely's first graduate-student advisee was On Amir. Before coming to Cambridge, Amir had reached out to Ariely as a fellow Israeli for advice about M.B.A. programs; Ariely persuaded him that a Ph.D. program would be, of all things, more fun. Because the topics that attract Ariely represent the intersection of economics and psychology, they often have policy implications, notes Amir, now an assistant professor at the Rady School of Management at the University of California at San Diego. Much policymaking hinges on the assumption that potential transgressors will rationally weigh the costs and benefits of their actions. To behavioral economists, of course, that's an incorrect assumption.
Think about the annual burden of filling out tax forms from the IRS. Why not use the forms, Amir suggests, to explicitly remind citizens of the standards of honesty that were long ago impressed on them? That framing language would provide a springboard for decisions. Tax preparation would become a signal of the individual's character. It wouldn't be a mere financial transaction with the government in which the taxpayer gauges what he or she can get away with.
As New York Times columnist David Leonhardt has noted, a decade ago, economics seemed to be "devolving into a technical discipline that was even less comprehensible than it was relevant." There's nothing numbingly technical in Ariely's exploration of why we choose a "free" checking account, with no benefits attached, over one with minimal costs and appreciable benefits. If economics is no longer, in Leonhardt's words, an "old and tired discipline," that's in part owing to the work of the behavioral economists who have come of age with Ariely.
Now Ariely is leaving MIT and circling back to Duke, a decision that, to this decoder of decisions, is sensible. He likes Duke's teaching emphasis; he'll be teaching undergraduates as well as business students. Permeable boundaries between disciplines are another Duke hallmark, he says, and he's already tapped into neuroscience—another field that grapples with inferences, expectations, emotions, and their consequences.
"It is very hard to predict how happy you'll be in a future situation with new circumstances," he says. "But one of the things that make me the happiest is having coffee with interesting people. Most of the time we sit in the office and work. That's okay. The real excitement comes from sharing ideas, learning new things, getting feedback from people."
Among the people in Ariely's feedback loop is Lynch, his former dissertation adviser and current colleague. About a year and a half ago, Lynch and Ariely were in Orlando, Florida, at a professional meeting. As they got up from dinner, Lynch felt faint and collapsed. An ambulance was summoned; Lynch was taken to a hospital emergency room and then to another area for treatment. A concerned Ariely tried to get in to see his mentor, but was told that it was against hospital rules. Frustrated, he began to fake an allergic reaction and insisted on medical care. Sure enough, he was wheeled back to the room where Lynch was being held. A startled Lynch watched as Ariely, now in a hospital gown, bounded over to him and asked him how he was doing (quite well by that point). "Pretty soon," Lynch recalls, "the nurse comes to get him, they give him an epinephrine shot, and he gets stuck with a $400 hospital bill."
Lynch laughs at the memory of a dramatic—and rather outlandish—act of humaneness. It was irrational but, knowing Ariely as he does, predictable.
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