Dan Ariely debunks opportunity cost at Science Cafe meeting

Ideally, people would think about the opportunity cost of making a purchase, but Duke economics professor and best-selling author Dan Ariely knows people typically only think about the pain associated with spending money.

Ariely spoke at the Carolina Science Cafe meeting at Top of the Hill Restaurant & Brewery Wednesday.

Ariely, who has a degree in Cognitive Psychology from UNC and has appeared on several TED Talk lectures, discussed the ways humans perceive money and how they actually do.

The professor, who has multiple New York Times Best Sellers, said common economics teach that consumers make rational decisions based on what they buy and the opportunity cost they give up to buy it, but that isn’t realistic.

“Thinking of money in the right way is thinking of opportunity costs in the right way, which is impossible,” he said.

Ariely said humans think of money in relative terms.

“Once you spend a lot of money, a few hundred more seems really cheap,” he said.

Other factors that influence economic decisions, he said, include what he called the pain of paying, the feeling one has when one gives money away.

“When we spend money we spend an extra pain of parting with it,” he said.

Ariely also discussed the human spirit and how humans can behave in predictable —but morally questionable — manners.

He referenced a study done on Duke students where, given the opportunity, 90 percent of participants bribed a researcher to be placed in a study that would pay them more money. Ariely was troubled by how many sacrificed morality for a few extra dollars.

The response from the crowd was a mixed feeling of optimism and reflection.

Second-year pathology graduate student Rachel Dee said the talk resonated because she is financially independent.

“Now that I am on my own, my perspective of money has changed as my responsibilities have changed.”

Freshman Katie Arney said the event forced her to reflect on her motives.

“Am I motivated by money or my personal values?” Arney said.

David DeMarini, a researcher with the Environmental Protection Agency and an environmental science engineering professor at UNC, said he left with a feeling of slight unrest about the ways of humans.

Regardless, he said he still has hope for the future.

“Collectively, as a society we can decide a good outcome for the future.”

Ariely said society needs to change as a whole if people are to make better decisions on an individual level.

“If we want to create change in people, we need to create a new environment.”

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