In each of these studies, people were strongly influenced by the irrelevant factors—the ones that speak to our unconscious desires and motivations, which traditional economists ignore. Moreover, when quizzed about the reasons for their decisions, the subjects proved completely unaware that those factors had influenced them. For example, in the detergent study, subjects were given three different boxes of detergent and asked to try them all out for a few weeks, then report on which they liked best and why. One box was predominantly yellow, another blue, and the third was blue with splashes of yellow. In their reports, the subjects overwhelmingly favored the detergent in the box with mixed colors. Their comments included much about the relative merits of the detergents, but none mentioned the box. Why should they? A pretty box doesn’t make the detergent work better. But in reality it was just the box that differed—the detergents inside were all identical.20 We judge products by their boxes, books by their covers, and even corporations’ annual reports by their glossy finish. That’s why doctors instinctively “package” themselves in nice shirts and ties and it’s not advisable for attorneys to greet clients in Budweiser T-shirts.
In the wine study, four French and four German wines, matched for price and dryness, were placed on the shelves of a supermarket in England. French and German music were played on alternate days from a tape deck on the top shelf of the display. On days when the French music played, 77 percent of the wine purchased was French, while on the days of German music, 73 percent of the wine purchased was German. Clearly, the music was a crucial factor in which type of wine shoppers chose to buy, but when asked whether the music had influenced their choice, only one shopper in seven said it had.21 In the stocking study, subjects inspected four pairs of silk stockings that, unbeknownst to them, were absolutely identical, except that each had had a different and very faint scent applied to it. The subjects “found no difficulty in telling why one pair was the best” and reported perceiving differences in texture, weave, feel, sheen, and weight. Everything but scent. Stockings with one particular scent were rated highest much more often than the others, but the subjects denied using scent as a criterion, and only 6 of the 250 subjects even noticed that the stockings had been perfumed.22
“People think that their enjoyment of a product is based on the qualities of the product, but their experience of it is also very much based on the product’s marketing,” says Rangel. “For example, the same beer, described in different ways, or labeled as different brands, or with a different price, can taste very different. The same is true for wine, even though people like to believe it’s all in the grapes, and the winemaker’s expertise.” Studies have indeed shown that when wines are tasted blind, there is little correlation between a wine’s taste and its cost, but that there is a strong correlation when the wines are not sampled blind.23 Since people generally expect higher-priced wine to taste better, Rangel was not surprised when volunteers he recruited to sip a series of wines labeled only by price rated a $90 bottle as better than another wine in the series that was marked as costing just $10.24 But Rangel had cheated: those two wines, perceived as disparate, were actually identical—they were both from the $90 bottle. More important, the study had another twist: the wine tasting was conducted while the subjects were having their brains scanned in an fMRI machine. The resulting images showed that the price of the wine increased activity in an area of the brain behind the eyes called the orbitofrontal cortex, a region that has been associated with the experience of pleasure.25 So though the two wines were not different, their taste difference was real, or at least the subjects’ relative enjoyment of the taste was.
How can a brain conclude that one beverage tastes better than another when they are physically the same? The naive view is that sensory signals, such as taste, travel from the sense organ to the region of the brain where they are experienced in a more or less straightforward fashion. But as we’ll see, brain architecture is not that simple. Though you are unaware of it, when you run cool wine over your tongue, you don’t just taste its chemical composition; you also taste its price. The same effect has been demonstrated in the Coke-Pepsi wars, only with regard to brand. The effect was long ago dubbed the “Pepsi paradox,” referring to the fact that Pepsi consistently beats Coke in blind taste tests, although people seem to prefer Coke when they know what they are drinking. Over the years, various theories have been proposed to explain this. One obvious explanation is the effect of the brand name, but if you ask people whether it is all those uplifting Coke ads they’ve seen that they are really tasting when they slurp their beverage, they almost always deny it. In the early 2000s, however, new brain-imaging studies found evidence that an area of the brain that neighbors the orbitofrontal cortex, called the ventromedial prefrontal cortex, or VMPC, is the seat of warm, fuzzy feelings such as those we experience when we contemplate a familiar brand-name product.26 In 2007, researchers recruited a group of participants whose brain scans showed significant VMPC damage, and also a group whose VMPCs were healthy. As expected, both the normal and the brain-damaged volunteers preferred Pepsi to Coke when they did not know what they were drinking. And, as expected, those with healthy brains switched their preference when they knew what they were drinking. But those who had damage to their VMPC—their brain’s “brand-appreciation” module—did not change preferences. They liked Pepsi better whether or not they knew what they were drinking. Without the ability to unconsciously experience a warm and fuzzy feeling toward a brand name, there is no Pepsi paradox.
The real lesson here has nothing to do with either wine or Pepsi. It is that what is true of beverages and brands is also true of the other ways we experience the world. Both direct, explicit aspects of life (the drink, in this case) and indirect, implicit aspects (the price or brand) conspire to create our mental experience (the taste). They key word here is “create.” Our brains are not simply recording a taste or other experience, they are creating it. That’s a theme we’ll come back to again and again. We’d like to think that, when we pass up one guacamole in favor of another, it is because we have made a conscious choice based on taste, caloric content, price, our mood, the principle that guacamole should not contain mayonnaise, or any of a hundred other factors under our control. We believe that when we choose a laptop or a laundry detergent, plan a vacation, pick a stock, take a job, assess a sports star, make a friend, judge a stranger, and even fall in love, we understand the principal factors that influenced us. Very often nothing could be further from the truth. As a result, many of our most basic assumptions about ourselves, and society, are false.
IF THE INFLUENCE of the unconscious is so great, it shouldn’t just make itself known in the isolated situations of our private lives; it ought to have a demonstrable collective effect on our society as a whole. And it does—for instance, in the financial world. Since money is very important to us, each individual should be motivated to make financial decisions based exclusively on conscious and rational deliberation. That’s why the foundations of classical economic theory are built on the idea that people do just that—that they behave rationally, in accordance with the guiding principle of their self-interest. While no one has yet figured out how to devise a general economic theory that takes into account the fact that “rationally” is not how people act, plenty of economic studies have demonstrated the societal implications of our collective deviation from the cold calculations of the conscious mind.