Predictably irrational
This book was first published in 2008 and became New York Times’ best seller for a long time. The author-Dan Ariely-is Professor of Behavioural Economics. This book is a watered-down version of his life-time academic works for general audience. All technical jargons and difficult concepts were explained using humorous examples, which make the book immensely readable. It is an eyeopening look at human irrationalities. I used to think that we are a rational being. We use logic to lead our lives and that is exactly what standard economics assumes—that we know all the pertinent information about our decisions, that we can objectively weigh the value of different options we face, and that we are cognitively unhindered in weighing the ramifications of each potential choice. The result is that we are presumed to be making logical and sensible decisions. And even if we make a wrong decision from time to time, the standard economics perspective suggests that we will quickly learn from our mistakes either on our own or with the help of “market forces.” On the basis of these assumptions, economists draw far-reaching conclusions about everything from shopping trends to law to public policy.
But we are all far less rational in our decision making than standard economic theory assumes. Our irrational behaviors are neither random nor senseless—they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.
A number of examples were given to illustrate how we routinely behave irrationally.
We generally focus on what we may lose, rather than what we may gain. Our aversion to loss is a strong emotion. Loss aversion bias implies that one who loses $100 will lose more (roughly double) satisfaction than another person will gain satisfaction from a $100 windfall. In marketing, the use of trial periods and rebates takes advantage of the buyers’ tendency to value the goods more after the buyers incorporate them in their lives so returning the goods becomes unlikely as emotional cost of returning would be higher than it actually should be.
Loss aversion bias also applies to clinicians, we make clinical decisions all the times by weighing the risk and benefit potential of each choice and we tend to overly focus on minimising risks. Clinical strategies that focus on minimising risks or maximising benefits can be completely different. We should be acutely aware of this well-documented human bias and try to intentionally counterbalance this bias by equally weighing risk minimising and benefit maximising strategies.
An example on findings of randomise-controlled trial is a typical story in the evidence-based era, which started to gather steam around the time the book was first published. In 1993, one orthopedic surgeon had increasing doubts about the use of arthroscopic surgery for a particular arthritic affliction of the knee. Did the procedure really work? He recruited 180 patients with osteoarthritis from the veterans' hospital in Houston, Texas, and divided them into three groups. One group got the standard treatment: anesthetic, three incisions, scopes inserted, cartilage removed, correction of soft-tissue problems, and 10 liters of saline washed through the knee. The second group got anesthesia, three incisions, scopes inserted, and 10 liters of saline, but no cartilage was removed. The third group—the placebo group—looked from the outside like the other two treatments (anesthesia, incisions, etc.); and the procedure took the same amount of time; but no instruments were inserted into the knee. In other words, this was simulated surgery. For two years following the surgeries, all three groups were tested for a lessening of their pain, and for the amount of time it took them to walk and climb stairs. The groups that had the full surgery and the arthroscopic lavage were delighted, and said they would recommend the surgery to their families and friends. Strangely, the placebo group also got relief from pain and improvements in walking—to the same extent, in fact, as those who had the actual operations. When the study appeared on July 11, 2002, as the lead article in the New England Journal of Medicine, some doctors screamed foul and questioned the method and results of the study.
A number of explanations were given on why placebo works. One is belief—our confidence or faith in the drug, the procedure, or the caregiver. Sometimes just the fact that a doctor or nurse is paying attention to us and reassuring us not only makes us feel better but also triggers our internal healing processes. Even a doctor's enthusiasm for a particular treatment or procedure may predispose us toward a positive outcome.
The second mechanism is conditioning. Like Pavlov's famous dogs (that learned to salivate at the ring of a bell), the body builds up expectancy after repeated experiences and releases various chemicals to prepare us for the future.
Placebo effectiveness
Hargreaves published an interesting systematic-review paper on comparative efficacy of oral analgesics in 2004. Almost 20% of patients on placebo pills reported more than 50% pain reduction. Placebo effect on pain reduction is considered substantial and clinically important from clinical trial standard. Also the effect is based on a very large sample size of more than 10,000 patients, so the placebo effect is based on a very solid ground.
Price affects placebo effectiveness.
At $2.50 almost all of research participants experienced pain relief from the placebo pill. But when the price was dropped to 10 cents, only half of them did.
Moreover, it turns out that this relationship between price and placebo effect was not the same for all participants, and the effect was particularly pronounced for people who had experienced more pain, and thus depended more on pain medications; they got even less benefit when the price was discounted. When it comes to medicines, then, we learned that you get what you pay for. Price can change the experience. I wonder if this would also apply to dental treatment fee. Would patients perceive that the treatment is of high quality if the fee is high.
“Even the most analytical thinkers are predictably irrational; the really smart ones acknowledge and address their irrationalities.”