‘Predictably Irrational’ challenges Adam Smith’s economic theory

It’s about time someone challenged conventional economic theory and exposed some of its central tenets as the myths they are.

In “Predictably Irrational: The Hidden Forces That Shape Our Decisions” (HarperCollins, 2008), Dan Ariely, professor of behavioral economics at the Massachusetts Institute of Technology, presents a series of fascinating experiments that stand economist Adam Smith’s “rational actor” on his head. The myth of the rational actor holds that human beings compute the value of all the options available to them, then choose the best one. Further, if people make a mistake, market forces will offer the correction needed to force them back to rationality.