Question

In: Economics

What does it mean for irrationality to be “predictable”, and why is it important?

What does it mean for irrationality to be “predictable”, and why is it important?

Solutions

Expert Solution

Predictable irrationality describes how our minds consistently and reliably handle themselves irrationally. The cognitive variant of the optical illusions is predictable irrationality. Just as your eyes play tricks on you, so do your reasoning and decision-making faculties.

Predictable irrationality is why people behave more honestly in a room that smells of citrus (our brains associate citrus smells with cleanliness and combine cleanliness with virtue) This is why Surgeon General warnings can actually increase cigarette purchases

Predictable irrationality is why people who are asked to remember 12 times that they were self-confident consider themselves to be less self-confident than people who are only asked to remember 5 times that they were self-confident


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