← Back to all episodes
What Is Behavioral Economics?
Dan Ariely • 2025-08-06
Dylan Carnahan:Welcome to The Simple Questions Podcast. This is your host, Dylan Carnahan. The question for this episode is, what is behavioral economics? You will learn in this episode, how behavioral economics expands on classical economics, how psychological factors shape our decision-making, and what drives your purchasing decisions. Our guest authored three New York Times bestselling books, Predictably Irrational, The Upside of Irrationality, and The Honest Truth About Dishonesty, conducted groundbreaking experiments on pricing, cheating, and social norms, holds the James B. Duke Professorship of Psychology and Behavioral Economics at Duke University. I introduce to you, Dan Ariely. I'm sitting at my computer one night, strolling when I see I have a reading assignment from Dr. Malcolm Gold. His economics class is requiring me to read an excerpt of a book called Predictably Irrational. This would end up being one of the few things that I was required to read that would end up following up on outside of my academic career. And that was really my first introduction to behavioral economics. So I'm curious, Dan, how did you first become interested in behavioral economics?
Dan Ariely:Okay. So my story is a little longer than yours, and it also involves my half a beard.
Dylan Carnahan:Okay.
Dan Ariely:So maybe I'll start with this half a beard. So why do I have a half a beard? So three reasons. The first one is that many years ago I was badly burned. And most of my body is covered with scars, including this side of my face, so I just don't have hair on this side. But of course I could shave. Why don't I? So for many years I shaved. And then a few years ago I went on a month long hike. I didn't shave and I ended up looking like this. And I looked for the first time in the mirror and I didn't like this look. I thought it was strange. And I thought I'll shave it off. But I said I'll give myself a few weeks. It took me a month to grow. I'll never do it again. And let me keep it for a while. And then in those two weeks, two strange things happened. The first one was that a few people reached out to me to tell me that they liked the half a beard. Why? These were people who were struggling with their own injuries. And these were people that were feeling that they were trying to hide their injuries. And they said that the fact that I'm so out with this, look how much I don't care. I don't mind being non symmetrical. So I gave them some strength. For example, across the street from me, there's a school and one of the women working there, she said she also was a burn patient. She has a burn on her arm and she always wore a long sleeve shirt. And she said, now I am going to try. But the second thing, this happened about four months down the line with this. So I said, I'll keep it a bit longer. If I can help people, I'll keep this half a beard a bit longer. But the really strange thing, unexpected, happened about four months down the line, where all of a sudden I feel better about my scars in general. I have lots of deformities, lots of things don't work well. And I always felt it was me and my injury. And all of a sudden, four months into this half a beard deal, I feel better about this. And I say, what happened? Why now? And what I realized is that I'm going through the same thing that those people who said they're stopping to hide have done. So think about somebody like me. I wake up in the morning, smooth on this side, stubble on this side. And the act of half shaving is also an act of hiding. And I'm less non-symmetrical, I'm more non-symmetrical before shaving, less non-symmetrical after shaving. And stopping that, letting go was incredibly healing. Increased self-acceptance was very good. Now, how is this connected to social science? I think, I think that's really what social science is about. I think social science is about finding these half-abused. It's about finding these things that we don't think would help our lives, but they actually would. So we all have intuition. What would make me happier was in us. But, but social science is supposed to say, these are the things that intuition points to and are correct. And these are the things that your intuition points to, like for me shaving, that are actually wrong. So that's, that's kind of what I think I'm trying to do. I'm trying to understand what are the real drivers? What are the things we're not seeing, but are actually good for us?
Dylan Carnahan:Well, I appreciate that explanation in sharing your own, your own personal story. You know, continuing your adventure, so to speak. You know, how in applying that conceptually, how does behavioral economics differ from classical economics?
Dan Ariely:So, so in classic economics, it's a very beautiful study, but it assumes that people are perfectly rational. People can compute all the information and look into the future and make decisions, not be encumbered by their emotions. And, and, and it's a beautiful way to think about human behavior, but it's not exactly correct, because it starts with these very, very strong assumptions. In contrast, behavioral economics doesn't make many assumptions. Instead, what we do, we put people in different situations. And we see that people text and drive and overeat and don't save for retirement and don't take their medication and spend too much time on social media and hate each other and, you know, are willing to kill and, you know, all kinds of things like that, that you say, well, it looks like we're a different machinery. Now, if you want to kind of think a little bit about why we're like this, why we're irrational, my metaphor for the human mind is that the human mind is like a vintage Swiss army knife. What do I mean by that? So let's start with the Swiss army knife, part of the metaphor. The Swiss army knife is not particularly good at anything. There's not a single task that you say, I need a can opener. Let me go to the Swiss army knife. I need a screwdriver. No, no, no. What is the greatness about the Swiss army knife? It is compact. It has lots of tools, all of them mediocre, but it's compact. And our mind is like that. We're not particularly good at anything. We're sort of good in lots of things, and it's compact. We can carry it with us. But my metaphor is that the mind is not a Swiss army knife, it's a vintage Swiss army knife. And what I mean by that is that our mind developed its decision-making tools, like the tools in the Swiss army knife, a long time ago for a very different purpose when we were roaming the savanna. So we are carrying with us, we have this ancient tool. It was never that good, but it was fit for a different environment. And now it's not that good and not relevant to our environment. So we don't, for example, have a tool to deal with fluctuation of stocks in the stock market or to understand compound interest. We don't have a tool to deal with donuts. We don't have a tool to deal with divided attention between phones and cars. So we have these mechanisms and we're applying it in the best way we can. But the world just gets us to make lots of mistakes because we don't have the right tools. Now you can imagine that one day we will have a compound interest module. We'll have these tools to deal with modern problems, long-term health, side effects, you name it. But right now, we don't.
Dylan Carnahan:I appreciate the analogy. That's kind of very, very helpful. And again, I think we can all personally relate to aspects of that, right? Like social media. I know that's a big thing, something we have a craving for.
Dan Ariely:Let's think about social media. I hope you don't mind. Feel free to look at me, but I'll say. So when we lived in a small community of, let's say, 200 people, gossip was a great idea. Why? Because imagine you wanted to do something bad to me. You wanted to take my apple. And if there was no gossip, you might say, hey, I'll take Dan's apple. What can he do to me? He's older and he's not as fast. But if you know that I can gossip and you know that everybody would listen to my gossip, you say, wait, wait, wait, I don't want to deal with Dan. He is a gossip. He'll tell everybody. Nobody will. Everybody will worry about me. Nobody will will cooperate. So gossip is a tool that gets peace in a small community, because when you have the threat of gossip, people behave better. Move forward many, many years. Now we meet people online. We can't impact their behavior. We are not in their circle of outcomes, but we still love gossip. But now we gossip about people who will never see. We've never seen. We get angry with them for all kinds of things. It's not a constructive emotion, but we still have it. And social media is doubling down on those primitive emotion that we have, because that's what operates us. So a social media platform says, what do I want to show people? Do I want to show some useful, factual information about how to live? Or do I want to show gossip about somebody? And the algorithms just ends up pushing on our weaknesses, rather than helping us move forward in some good way.
Dylan Carnahan:Yes, exactly. And speaking of weaknesses, you know, we're talking about a little bit about decision making as a whole. So what are some psychological factors that impact decision making?
Dan Ariely:So, maybe the first one is emotions. You know, and in the standard rational perspective, we're fully cognitive. We don't have the emotional part. And emotion have some beautiful things in it. We care about other people. We fall in love. I mean, there's lots. I'm not against emotions. We should have emotion. But it also derails us in many ways. It gets us to be excited about cookies, and it gets us to gossip, and it gets us to have revenge, and it gets us to not think long term, and succumb to temptation, and so on. So that's one big category is emotion. Another one is that we can't think correctly about money. Money is all about opportunity cost. Every time you spend a dollar on something, you're not going to spend this on something else. But it's very hard to think about. And I'll kind of give you a couple of examples. So one example is quite a few years ago, I went to a Toyota dealership. And these were people who were about to buy a car. They had an offer for the car and the payment and so on. And they were still debating it, but they basically had the offer. And I asked these people, I said, what would give up if you go ahead and buy this car? What would you not be able to do? And people had no answer. Why? Because they never thought about it. And then I pushed them. I said, look, if you buy this car, something has to give. What? The most common answer I got was, if I buy this Toyota, I will not be able to buy a Honda. Which of course it's true. But that's not what I was looking for. I was thinking, you know, they would say, I'm giving up three weeks of vacation for the next three years and 70 lattes and, you know, but no. And the reality is that the more advanced we get in society, the harder it is for us to think about opportunity cost. So imagine that we lived in a cash society. And you came to me every day and every day I would give you $100, and I would say, that's your money for the day. And you pay some for rent and some for food and some for this. You would very quickly understand opportunity cost. You would say, if I spend too much for breakfast, I don't have time for dinner. What would happen if I gave you $700 every Monday morning? On Monday you would feel rich, by Thursday you would run out. What will happen if I give you the money for a month? What would happen if I add to it a credit card and a mortgage and car payment and student loans? Now you're in a situation where you don't understand the consequences of your action. Think to yourself, if you go and buy a new bicycle today, where's the money coming from? What would you not be able to do? It's very hard. It's very hard to think about this, right? You have like this vague sense, can I afford it or not? But you're not really sure where is it coming from. So money is an interesting example because to think about money the right way, we have to think about opportunity cost, but we can't. So we have lots of tricks to think about money, but they're not all good tricks. So we make all kinds of mistakes about it. So emotions derail us, money derail us. I think those are the big ones. We have a hard time thinking about the future. When you think about our future self, how much do we care? Not so much. So because of that, we do things that are good for our present self and not for our future self. I think those are kind of the big ones.
Dylan Carnahan:And so I'm curious, and we can talk about this from kind of two perspectives. We can begin with first off the consumer, but what are some ways that this impacts purchasing decisions as a consumer? Again, we're not running that, we're not using the prefrontal cortex much and asking, oh yeah, I'm going to buy a different brand of car, right? We're not asking questions like that. So what impact and how do businesses leverage that?
Dan Ariely:So lots, but maybe let's think about two examples. The first one is that we compute things in relative ways rather than absolute ways. So consider the following two examples. You go to buy a pen. The pen is $15. You're checking out and the person selling you the pen says, look, you're a really nice guy with a nice smile. I'll tell you what, we have another store, four blocks down the street, sister store to us, they're selling the exact same pen instead of $15 for $7. I'm perfectly fine with this. If you feel like it, walk four blocks, beautiful day, buy the pen for $7 instead of $15. Most people say, yes, I'll do that. And the people who say no say, I'm not going to do it, but I feel it's kind of the right moral thing to do, to go and get the cheaper pen. Case number two, you're buying a winter jacket. It's $1,015. The salesperson says, look, you have a really nice smile. I have to tell you, we have a sister store, four blocks down the street. They're selling the same exact jacket on a discount. It's not 1,015, it's 1,007, $8 less. Would you go now to work four blocks? Beautiful day, everything is the same. Now people feel like it's not worth it. Your bank account doesn't care where the money is coming from. Is it coming from a $15? It's $8. For your bank account, it's $8 versus four blocks. Worth it or not? Regardless of what's the initial price. But we think about money in relative ways, not absolute ways, so we make these mistakes. What does it mean? It means that when you buy a car, if somebody offers you an upgrade, you'll buy it. When you make something expensive, like you buy a house or you do something, it's very easy to spend more than you have plans. That's one example. By the way, sales use the principle of relativity. Here's a shirt that used to be 100 and now it's 50. Why do you care what it used to be? You should say, is this shirt worth $50 or not? The fact that it's at some point in history, it costs, somebody decided to post it for $100. Why is this relevant? It's relevant because we use relativity as a guide. Oh my goodness, it's a really good deal. Another thing that is really interesting is the notion of the pain of pain, the pain of pain. So imagine that tonight you went to dinner and you either paid with a credit card or with cash. Which one will be more painful, less pleasant? Of course, the cash. And why is the cash so much more unpleasant? It's because we see when we pay it and it coincides with the food. When we pay with a credit card, we eat now and we pay later. If we bought a gift certificate, we pay early and we consume later. With cash, we pay at the same time. So imagine that they own the restaurant. I realized that people eat 100 bites and pay $100. I came to you and I said, I'll give you a discount. It will be 50 cents per bite. Not only that, I'll only charge you for the bites you eat, the bites you don't eat, you don't need to pay. I'll serve you a dish and I'll sit back and every time you take a bite, I'll mark a little note, little V on my notebook and I'll charge you at the end of it, 50 cents per bite. How much fun will that meal be? Not that much. So, the pain of paying is a mechanism for us to either overspend or underspend, depending on the mechanism of payment. Where do you live?
Dylan Carnahan:Olathe, Kansas.
Dan Ariely:Where?
Dylan Carnahan:Olathe, Kansas.
Dan Ariely:Okay. How cold is it in the winter?
Dylan Carnahan:It's a little cold.
Dan Ariely:So, imagine that we took your energy meter, and it wasn't outside of the home, it was in the middle of the kitchen. Okay. Imagine that it didn't just go in kilowatts hour, it went in dollars. Imagine you had to feed these dollars, and then it would run down, and it wouldn't accept credit card, it had to be cash. How much of the heater would you use in the winter? I'm guessing less. You would see that that thing going down. Now, right now, you're not feeling the pain of paying because it's a meter outside of the house, and they charge you with the automatic payment a month later from your checking account. But if the meter was front and center, and you would see it going down, and money you preloaded and so on, your trade of comfort and money would have been very different. So the pain of paying is one of those things that we can modulate. We can get people to be more sensitive to payment or less sensitive to payment. So how companies use that? For example, subscriptions. Think about subscriptions. How many of those subscriptions would you keep if you got a request to pay every month and you had to pay with a check? You would think about it every month if it was a check, but now you're not thinking about it. So another category of places where we make mistakes is that we don't think about our spending and automated things are amazing from some perspective, but they get us to, our not thinking gets us to pay a price.
Dylan Carnahan:I'm curious, what are some other things that businesses do, aside from, it sounded like quite a bit regarding pricing strategy?
Dan Ariely:Yeah. So look, there are lots of things that businesses do that are also wonderful. So I don't know about you, but I like wine.
Dylan Carnahan:Okay.
Dan Ariely:And the wine industry is really interesting because it created what we call consumption vocabulary. It created the language for wine. Tannin, complexity, acidity, leg. They sell us special glasses. Now, is this placebo? Is this just a vaporware? Or are they enhancing the quality of the experience? It's enhancing the quality of the experience, right? If I drank a glass of wine without thinking about it, it wouldn't be the same. But if I slow down, pay attention and so on, it's a valuable thing. So, you know, there are things that are creating value in our minds because they change our understanding of meaning, and because they understand the attention that we get. Like, I don't think that as many people would run a marathon if it wasn't coming from ancient Greece. But it's a brand. It's a marathon. It's connecting us to that. And, you know, so companies do lots of things to get us to value things at the higher level, because they add a sense of meaning, they add a sense of connection, they add a sense of appreciation, signalling. I'm telling you something about who I am. Companies tell us the efforts that you took to create something. And some of it is great, because some of it helps us. So sometimes companies take advantage of us, but sometimes they understand our weak points and they help us enjoy something better. So think about a brand that you love. Did the company waste your money investing in that? You would say no, because part of my enjoyment comes from the fact that it's a brand and I know what it is and other people know what it is and so on. So some investments are... Okay, some investments take our weak points and abuse it, and some investments take our humanity weak points and improve things for us.
Dylan Carnahan:Yeah, I like the mental value creation, like the inner subjective ideal of something and creating a communal aspect or perhaps like you're saying, adding these words that can be used as a barometer to maybe determine how good something tastes.
Dan Ariely:That's right. So I mentioned placebo. I'm a big fan of placebos, and I actually did some studies on placebos. I gave people a fake pain medication, and I checked how much pain they can tolerate. And what I saw was that placebo helped. Placebos got people, people exposed themselves to electrical shocks, and we saw what intensity they could expose themselves to. And placebos work. People can, after a placebo, can give themselves more intense electrical shock and feel less pain. And expensive placebos work better than cheap placebos. Now, with placebos, we know how it works. When you get an injection from a physician and you think it's a pain medication, your body secretes a substance that is very much like morphine. You're not getting it from the injection, you're getting it from your brain. Now, if you just stand there and you say, I have pain, please, please brain, give me some pain medication, it doesn't work. But if you get an injection, that creates an automatic release of these pain medications. So you know, for me, that's placebo. Placebo is about the fact that our reality comes from the world and from our minds. It's a combination of both. If you have a dinner and you have amazing expectations, you're experiencing a different feeling if you have terrible expectations. And if you have a meeting with a friend you love, no matter what happens in that meeting, it will be different. And if it's a friend you don't like so much. So our reality is a combination of what's happening around us and what's happening in our brain. And in placebos and expectations and branding and all of those things can work on our brain to create a different reality. So when you are taking a pain medication that you believe in, it will actually work better. If you think it's high quality, it will work better. And that, of course, really muddies the water about what's our reality and how much of our reality is structured within our brain.
Dylan Carnahan:Yeah, the implications of that are very large, and they extend well outside simply the value of a product or service. So Dan, you know, what impact do things like that have on our personal beliefs?
Dan Ariely:On our personal?
Dylan Carnahan:Correct.
Dan Ariely:Personal goals or personal life? So I think that, you know, at the end of the day, once we understand that a reality is structured, a lot of it by our internal world, we need to figure out where are our weak points and what we should augment. And one of the things that I am very concerned with these days is what we call resilience. So let's think a little bit about resilience. What is resilience? The metaphor I love the most about resilience is something called secure attachment for kids. So imagine you're a parent and you have a kid and the kid is four years old, and you go with them to the park and you say to the kid, kid, go to the swings. And kid goes to the swings and comes back an hour later. If you've done that, you have a kid with secure attachment. The kid knew that you were there. On the other hand, if you say to the kid, kid, go to the swings and they go, but they look back every 90 seconds to see you're there, not so successful in terms of secure attachment. Now, if you think about this idea, secure attachment and resilience, there are people among us who walk around the world like the first kid. We know that if something bad will happen, somebody will catch us. It might be a friend, it might be a parent, it might be the government, but we know that. Then on the other hand, you have a kid that people that don't have secure attachments that basically say, I can't take any risk. If I fall, nobody would be here to catch me. I can't take it. Now, think about that difference, the difference between somebody who can take risks in the world versus somebody who's always afraid that something will happen. Now, the reason this is important is because we're at the low point in terms of our resilience. Why? Because what are the sources of resilience? Friends, but over the last three, four decades, people spend less and less time with friends and more and more time with significant other and driving kids. So, our resilience from friends is going down. Our resilience from family is going down because people live further away from their parents and so on. Our resilience with the government has gone down. People have less trust that if I need health insurance or disability insurance or unemployment, the government will be there for me. My simple equation is that the stress we have in life is the outside stress minus resilience. So, the world is getting very stressful. Our resilience is getting low. The difference between them is getting larger and people are correctly stressed out. Now, if you think about it, you say, okay, so we have the real stress in the world. Can we reduce it? Tough. Ukraine, Gaza, US, polarization, Iran, the Houthis, lots of reasons to be stressed. Resilience is much easier to improve. So, I think that once you understand that a reality is a construction of the outside reality and the inside reality, it does give you an appreciation for the things that we can do. So, imagine I asked you, I said, okay, Dylan, you want to improve your resilience. What would you do in the next six months? You know, it will be about investing in friends. It will be about spending time. It will be about sharing. It will be about looking at your relationship and say, which relationship have I not invested enough in? It will be, you'll do all kinds of things to build that up. So, I took resilience as an example. But if you say, what does it mean for us personally, at the end of the day, we need to understand it as the world and the world is translated by our brain on the inside. And we need to work on the translation, which means that sometimes we can change the word. Sometimes we can change the translation. And all of those are mechanisms we need to think about.
Dylan Carnahan:So in talking about this translation, and I greatly appreciate you walking through that, what are some of the, I guess, positive or negative externalities of having a great translation or a poor translation?
Dan Ariely:So, it's kind of tricky because do you want the translation, how much do you want the translation to be disassociated from the outside world? So, the outside world can be stressful and difficult and so on. And you could be, oh my goodness, things are really amazing. You know, how much, how much do you want that translation? I don't have a good answer. I don't have a good answer for this about what's the amount. But I do think we need mechanisms to try and improve when something is painful and try to focus on it's not. And, you know, my feeling, my subjective feeling when I was a patient in hospital, the most difficult painful treatment were bandage removal. And so most of my body was burned, taking bandages, takes a really long time, over an hour. And my feeling was that I was trying to kind of break myself into three roles. I was experiencing pain, nothing I could do about that. But I was trying to separate into another component, which is observing the pain. So I would ask myself, what kind of pain is this? Is it sharp? Is it oscillating? Is it increasing? Is it decreasing? Is it the level of the skin? Is it deeper? And then I had another kind of role of saying, and how much control can I have over this? And at least my feeling was that if I had 100% of pain, most of it I was experiencing, I couldn't do it, but there was maybe 15% that was allocated to the observer, and it became less painful, and maybe 5% of the person trying to control. And that diminished the overall pain. Now, in that particular case, I would have been happy to have less pain if I could do it more. But I don't have a good answer for you, a general answer to say, when should we experience the world correctly and when not. It really depends on for what purpose and so on. You know, there were, I wrote a book on dishonesty. And I do studies on how people lie and exaggerate and so on. But I was reflecting on some times where the nurses lied to me. And some lies were okay because there was some really painful treatment I was going to have. And they told me it's not going to be painful. Now, I would have a month of sleepless nights if I thought it's going to be painful. At the same time, I lost a little bit of trust in the nurse that told me that. So it is mixed. But I think to what extent do we want to experience the world exactly as it is, and to what extent do we want to make the pain less and the pleasure higher? I'm certain that we want to do some of it in most cases, but it's not in all cases, and it's not by a ton. For example, when things are tough, you want people to deal with it, not to just take pain to them. So anyway, I don't have a good answer for this, but I think it's about how much of it do we want to sweeten things.
Dylan Carnahan:That cross tabulates through a lot of different areas. I can already see, like, parenting, right? Or providing feedback. And I also can see how a lot of this is dependent upon some kind of mental construct that you have to create yourself as well.
Dan Ariely:Yeah. Providing feedback is a great example. Do you provide perfectly accurate feedback to people, or do you? Yeah. So imagine I'm doing a lot of work now on end of life.
Dylan Carnahan:Okay.
Dan Ariely:Imagine somebody is on the deathbed. Do you want to tell them the absolute truth? Not clear. There's not much to do with it at this point. If somebody is young and there's room for improvement, maybe the answer is yes. So I think that how much do we want our psychology to reflect the world versus not depends on our, what are we trying to do with our mindsets.
Dylan Carnahan:And speaking of mindset, Dan, oftentimes, I will ask previous guests, you know, if they have any questions for an upcoming guest. And my economics professor, Dr. Malcolm Gold, have requested he wanted to hear your answer to this. What makes people vote for politicians who support policies that make them worse off?
Dan Ariely:Yeah. So I don't think that's what people are voting for. It's not as if the politician says, vote for me, I'll do something that is going to be worse for you. But elections in the US but in other countries as well have become much more about identity than about outcomes. So if you asked, like, why do people choose what they choose, it's about us versus them. And it doesn't matter who is the leader. It's about, it's against, it's against somebody else. So there's a term, there's a story, there's a story in the Bible that there was these two tribes that were at war. And after they war, they separated, they were each on their side of the river. And it just so happened that these two tribes pronounced the name of a plant that is like a wheat, shibolet. They pronounce it slightly differently. One of them said shibolet, one of them said cibolet. So what they would do is they walk around with this plant and I would have it and I would say, hey you, I see you, I don't know which tribe you're in. I said, how do you call this plant? If you call it the way I call it, great. We're the same tribe. If you call it the way the other tribe, I need to chase you away. Now we now use this term shibolet as a marker for a discussion that looks like about the fact, but it's not. When I show you the plant and I say, what's the name of the plant? Do I care about the name of the plant? No, I care about your identity. If you look at a lot of US politics, but also other places, there are lots of discussion that look like they're about the facts, but they're not. They're about identity. I think at the end of the day, a lot of politicians get people to vote for identity, not for topics, and then they abuse it for whatever topics they want to approach. But that's what people are choosing. People are choosing identity, then it's being kidnapped and taken hostage for other purposes. But the vote is not about outcome. If you ask people in the US, what is your politician, what are their outcome goals? To say, I don't know, you know, in most cases, Trump, for example, when he offered these very high tariffs, his supporters said, it's great. When he said no, they say it's great. It's not about an idea about what will happen. It's about support for an identity. These are very confusing discussions, by the way, because when you hear a discussion that is a shiboleth, it's very confusing. What are they talking? Like, it's not clear that it's not about the fact, but it's not about the fact.
Dylan Carnahan:And it sounds like at the end of the day, you could derive a great deal of comfort from, you know, having someone reaffirm your beliefs or maybe someone that just appears to be very steady.
Dan Ariely:Yeah. So all of us do that. So all of us read the new sources that agree with us. You know, we basically reading the source from the other side of the political spectrum is very tough. But if we read what we believe in, it's very reassuring. It says, Oh, Dan, you're so smart. You knew all of this, plus something else that you're going to agree with. It's a wonderful feeling. How many of us want to confront the reality of how much we don't know and how much we're not certain and so on? It's just very tough. So we go for comfort. We go for comfort. We eat fast food. We make kitchens that make it easy for us to eat without moving too much. We love comfort. And in the pursuit of comfort, the physical and cognitive, we do things that are not necessarily in our long-term best interest. And I think, for example, if you understood this, you would say, you know what? I think that the ability to split media, that the Democrats have their media and the Republicans have their media, is very unhealthy for the future of democracy. And the moment each party just talks to their voters, there's no dialogue, there's no improvement. The conversation becomes chivalric in identity instead of about the fact. So I think we need to understand how our technology fits and doesn't fit our psychology. And if you say, our technology is each party talks to its voter, not a good fit with the human mind as a decision making tool. We need to rethink about it.
Dylan Carnahan:You know, we've talked a lot of a lot of the concepts we've discussed hit on a whole lot of things, whether that be just basic, you know, financial literacy implications, decision making as a whole, and communication. Dan, what's your advice? What advice do you have for the average person?
Dan Ariely:About what? About anything?
Dylan Carnahan:Go for it.
Dan Ariely:Look, I think that maybe the easiest way to think about having a better life is to figure out what we really want to do and not let the world derail us from it. So I go to the supermarket, I have a list, this is what I want to get. Then the supermarket has their own list and they're trying to do that. But I think that from time to time, thinking about our objective and our goals, and then trying to stay as close to them is a very, very important thing. So that will be one piece of advice. The second one is that sometimes emotion gets in our way. The question is, how do we get ourselves less emotional in those cases? And one mechanism to do it is to pretend that we're giving an advice to somebody who is just like us, and then turn around and accept that advice. So I'll give an example from a study. We did a study that says, imagine that you were in a hospital, in a doctor's visit, they just diagnosed you with something, and you're thinking about getting a second opinion. How likely would you be to tell the doctor, excuse me, but do you mind if I go for a second opinion? Can I have my medical record so I can consult with somebody else? And people basically said, I'll never do it, almost never. And then we asked people, imagine this is a friend of yours is in this situation, what would you advise them? So, oh yeah, you should go. For a person telling your doctor, I don't trust you, I want a second opinion. It's very tough. It's an emotional toughness. Somebody else is now, I don't care about your emotion. You know, if next time you go to a restaurant, ask somebody else to order for you. They will not be French fries. They'll be salad, right? People are less influenced by your emotion, they're more influenced by what's good for you. So another kind of way, like a little trick is to think about, what would my rational self that is advising other people would advise myself? And then let's take that advice.
Dylan Carnahan:That's very good. Are there any other kind of little psychological tricks like that, that you find yourself using?
Dan Ariely:There are many. There are many. With pricing, whenever there's a sale, don't think about the big price, think about the second one. What would I do? Habits. Habits are really interesting because they can derail us or they can be our friends. So once, like, every time we come to a decision, it's very hard to think about the decision thoughtfully from scratch. So habits are basically a way to make lots of decisions in a good way. It's basically saying, if I rely on myself to make the right decision every time, I might not. So let me create a personal rule or a habit or something like that. So once a year, try to audit your decision. Say, where are the decisions where I feel I'm not maximizing? And let me see if I can create a rule or a habit or something that would solve it. So imagine we have small decisions and big decisions. Big decisions are big. We spend time and so on and there are ways to make better decisions. Small decisions, we're not going to think very carefully about every time we buy coffee, whether we buy the small, medium, with a muffin or without a muffin. But repeated decisions are small decision at the time, but together they add up. So we need to think about them as a separate category and say, can we create some general mechanism that would carry us through and make us more likely to make the right decision every time? That's one that I think is really worthwhile focusing on.
Dylan Carnahan:There's essentially these high-volume decisions that accumulate over time. It seems like that would be a good opportunity again for automation, if you can integrate that.
Dan Ariely:Absolutely, yep.
Dylan Carnahan:Dan, how do people find out more about you and the work you do?
Dan Ariely:My website is probably the best place, danariely.com, danariely.com. I also have a few other websites if people are interested. I created a website called the Center for Advanced Bureaucracy, where I complain about bureaucracy. There is a website called The Life We Should Live, in which I invite people who had somebody die recently or are facing illness to register and talk to me. I'm trying to understand more about this topic. My general website is the best place.
Dylan Carnahan:Well, for those that are listening, we'll be sure to have those in the show notes for this episode. Dan, thank you for sharing your time and knowledge today.
Dan Ariely:My pleasure. So nice to meet you.
Dylan Carnahan:That wraps up our conversation with Dan. We talked about practical advice for applying behavioral economics and business in everyday life, how we decide who we follow politically, and a powerful reminder that we can control how much the world impacts us. Go to this episode show notes to see any resources they mentioned during our episode. And lastly, subscribe to The Simple Questions Podcast to get notified when our latest episodes are released. Thank you for listening, and remember to keep asking questions.