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In the latest in economics correspondent Paul Solman's Making Sense series, behavioral economist Dan Ariely mulls decision-making mechanisms in finance and they ways in which many people rationalize their unethical actions.
Next tonight, a chat about money and morality. It's part of economics correspondent Paul Solman's ongoing NewsHour series on "Making Sense" of financial news.
DAN ARIELY, behavioral economist: So here's how this experiment worked…
PAUL SOLMAN, economics correspondent: One of the more memorable moments from the stories we've done about the great recession, economist Dan Ariely, likening the behavior of consumers to that of dogs subjected to random electric shocks in psychological experiments.
The bell comes. And instead of jumping, the dog lays down on the ground whimpering. And I think we're all kind of like this dog right now.
Ariely is a behavioral economist, a field he came to by accident, tragic accident, as he lay in a hospital bed for nearly three years recovering from severe burns. It was plenty of time to ponder the irrational behavior of nurses who insisted on ripping his bandages off quickly, rather than peeling them off slowly as he requested.
Later, Ariely focused on irrationality in economics, a contradiction in terms since the dismal science is based on the belief that economic behavior is supremely rational.
On his Web site, Ariely takes the role of the Mac in the ubiquitous Apple computer ads.
Hello. I'm behavioral economics.
And I'm standard economics.
The Microsoft stand-in spouts the P.C. argument.
People are always making rational decisions all the time, not letting their emotions cloud their judgment, and always thinking about the future.
I just don't see how you can say this. We see stock bubbles. We see people overextending themselves on credit cards. We see people taking mortgages they shouldn't be taking. I just don't see where this rationality is coming from.
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