Optimally Irrational: The Good Reasons We Behave the Way We Do

Optimally Irrational explains that biases are good solutions to practical problems, challenging the notion of Homo economicus and presenting a unified theory of behavioralism, cognitive psychology, and evolutionary biology.

Format: Paperback / softback
Length: 325 pages
Publication date: 03 November 2022
Publisher: Cambridge University Press

For centuries, economists have believed that humans are cold, self-centered, and rational decision-makers, known as Homo economicus. However, the last few decades have challenged this notion. The world we inhabit and the situations we encounter are incredibly complex, revealing fascinating aspects of our behavior. In his book, Optimally Irrational, Page argues that our enhanced understanding of human behavior suggests that apparent biases are effective solutions to practical problems. Many of the flaws identified by behavioral economics are actually adaptive solutions that have evolved to help us survive and thrive in our environment.

Page provides an ambitious overview of the literature in behavioral economics, highlighting the flaws and their significance. Through this exposition, he presents a unified theory of behavioralism, cognitive psychology, and evolutionary biology. He gathers theoretical and empirical evidence about the causes of behavioral biases and offers a comprehensive view of what the discipline means for economics.

One of the key insights of Optimally Irrational is that biases are not necessarily bad or irrational. Rather, they are the result of cognitive shortcuts and heuristics that we use to make quick decisions in complex situations. These biases can lead us to make mistakes, but they can also be useful in certain situations. For example, the availability bias, which suggests that we are more likely to remember information that is easily accessible, can help us make decisions quickly in emergencies.

Another important aspect of the book is that Page challenges the traditional view of economics as a value-free science. He argues that economics is not just about maximizing profits but also about understanding and explaining human behavior. By incorporating insights from behavioral economics, economists can gain a better understanding of why people make the decisions they do and how they can design policies that promote social welfare and economic growth.

Optimally Irrational also provides practical examples of how businesses and individuals can use behavioral economics to make better decisions. For example, companies can use pricing strategies that exploit cognitive biases, such as the anchoring effect, to increase sales. Individuals can use mindfulness and cognitive biases to improve their financial decision-making and reduce stress.

In conclusion, Optimally Irrational is a thought-provoking and influential book that challenges our understanding of human behavior and economics. By highlighting the adaptive nature of biases and providing practical examples of how they can be used to make better decisions, Page offers a new perspective on the discipline that has the potential to transform the way we think about economics and human behavior.

Weight: 434g
ISBN-13: 9781009209205