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Misbehaving: The Making of Behavioural Economics
RICHARD H. THALER: WINNER OF THE 2017 NOBEL PRIZE IN ECONOMICS
Shortlisted for the Financial Times and McKinsey Business Book of the Year Award
ECONOMIST, FINANCIAL TIMES and EVENING STANDARD books of the year
From the renowned and entertaining behavioural economist and co-author of the seminal work Nudge, Misbehaving is an irreverent and enlightening look into human foibles. Traditional economics assumes that rational forces shape everything. Behavioural economics knows better. Richard Thaler has spent his career studying the notion that humans are central to the economy - and that we're error-prone individuals, not Spock-like automatons. Now behavioural economics is hugely influential, changing the way we think not just about money, but about ourselves, our world and all kinds of everyday decisions.
Whether buying an alarm clock, selling football tickets, or applying for a mortgage, we all succumb to biases and make decisions that deviate from the standards of rationality assumed by economists. In other words, we misbehave. Dismissed at first by economists as an amusing sideshow, the study of human miscalculations and their effects on markets now drives efforts to make better decisions in our lives, our businesses, and our governments.
Coupling recent discoveries in human psychology with a practical understanding of incentives and market behaviour, Thaler enlightens readers about how to make smarter decisions in an increasingly mystifying world. He reveals how behavioural economic analysis opens up new ways to look at everything from household finance to assigning faculty offices in a new building, to TV quiz shows, sports transfer seasons, and businesses like Uber.
When economics meets psychology, the implications for individuals, managers and policy makers are both profound and entertaining.
376 pages, ebook
First published June 14, 2016
About the author
Richard H. Thaler
25 books2,079 followersRichard H. Thaler is an American economist who was awarded the 2017 Nobel Prize in Economics.
He is the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago’s Booth School of Business, where he is the director of the Center for Decision Research. He is also the co-director (with Robert Shiller) of the Behavioral Economics Project at the National Bureau of Economic Research and in 2015 was the president of the American Economic Association. He has been published in several prominent journals and is the author of a number of books, including Misbehaving: The Making of Behavioral Economics.
He is the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago’s Booth School of Business, where he is the director of the Center for Decision Research. He is also the co-director (with Robert Shiller) of the Behavioral Economics Project at the National Bureau of Economic Research and in 2015 was the president of the American Economic Association. He has been published in several prominent journals and is the author of a number of books, including Misbehaving: The Making of Behavioral Economics.
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May 25, 2015
He’s taken his time and he’s waited his turn, but Richard Thaler has delivered the definitive book on Behavioral Economics, the one you can’t afford to miss. It’s a summary of the main findings, a history of how they came about and a preview of coming attractions, with due care taken to pay tribute to those who came before Thaler and apportion credit to those who worked with him.
The field is not as new as Thaler would have you think. There’s bias in this account and it is a bias against those among his predecessors who tried to explain human behavior in a way that was consistent with mainstream economic theory. I’m thinking Gary Becker here (who tried to explain long lines outside empty clubs and packed cheap restaurants alike using an “upward sloping demand curve” and famously sat down to write a paper on suicide when his wife took her own life); I’m thinking the very same Robert Barro that Thaler makes fun of when he describes him as the smartest man ever, but who nonetheless made me understand in his book “Getting it Right” why superstars could get paid so much in a zero-sum game and got confirmation to his theory when Maradona got paid more than the rest of his team, Napoli, put together, and justifiably so because he not only took them to the Campionato, but also deprived much more fancied teams from winning it.
Thaler’s predecessors operated in a world where most Economics books had to start with a chapter explaining why Economics is a science. Of course they had to stick to the utility-maximizing / profit-maximizing orthodoxy! Besides, orthodox economic theory was not all that shabby when it came to predicting human behavior.
By the time Thaler was entering his prime, Economics no longer had to apologize to anybody and was much more open to heresy, of course. It was in a position to withstand additional questioning. Armed with a nice piece of math invented by Tversky and Kahneman it was ready to be taken to the next level.
Thaler takes you through the whole thing in the space of the shortest 358 pages you will ever read. As he promises at the start, he tells it through a bunch of stories, mostly the stories of his collaborations and his epic fights with Economic Orthodoxy.
The book is worth reading for the humor alone. The jokes range from pure slapstick (example p. 128: “we were trying to learn what ordinary citizens, albeit Canadians, think is fair”) to the esoteric inside joke, like when he mentions Vishny is a common co-author of Shleifer (to the best of my knowledge he’s never written a paper without Shleifer). If you’re not laughing the whole time, basically, there are squadrons of jokes flying over your head. My favorite type of humor, relentless repetition, is also very well represented. I lost count of the number of times I read the expression “invisible handwave.” The man is irrepressible, basically. You can’t keep him down.
There’s a sadness that goes with this too, and it’s that this is a bit of a category killer. “Misbehaving” Pareto-dominates all behavioral economics books that precede it in terms of readability, context, scope, you name it. I don’t know what I would do with myself if I was Dan Ariely or if I was Steven Levitt (Roe v. Wade findings notwithstanding), to say nothing of Tim Hartford. They now have to accept that there’s a book out there that beats their entire life’s work on all fronts.
The long problem set masquerading as a re-interpretation of behavioral economics that is Kahneman’s “Thinking Fast and Slow” is the only true exception to the rule, it continues to stand alone, but relative to “Misbehaving” it’s a cop-out. As he told Michael Lewis in the interview that preceded that book, Kahnemann did not want to write the history of the field, he did not want the book to have the feel of one’s last book. So the door was left wide open to Kahneman’s self-admittedly “lazy” student to jump into the breach.
This he has done with gusto.
Prospect Theory (how we are risk averse when we’re winning and risk loving when we’re losing) is taught straight from Tversky and Kahneman’s 1976 graph and is used to explain: (i) transaction utility, including Costco’s business model (ii) sunk costs (i.e. why you will carry on wearing an uncomfortable pair of shoes you paid 300 dollars for) (iii) the endowment effect (including later in the book how it undermines the Coase theorem) and (iv) “gambling with the house’s money” at the casino, versus the fact that outsiders get overpriced toward the end of the day at the racetrack. Bucketing of budgets gets thrown in for free.
Next comes a tutorial on Self-Control. Thaler explains that many humans discount future pleasure (or pain) on a scale that is totally unrelated to how we present-value bond cashflows and mainly operates on three levels: Now (intense), Later (much less intense) and Much Later (only slightly less intense than Later). This leads to preferences that are intertemporally inconsistent, a nightmare to Economic Orthodoxy, but very often true in real life. Heady stuff, and I promise, he makes it clear. He does not use graphs or charts or math. He explains it all with one picture: the famous cover of New Yorker magazine where everything this side of the Hudson is rendered in great detail, New Jersey through to California takes up as much space as West Manhattan and Asia is visible behind. You get that chart, you get how we humans really think about delayed gratification. Genius.
A chapter follows which is a summary of “Thinking Fast and Slow” but without trying to shoehorn the rest of Behavioral Economics into that model.
The next couple chapters deal with Fairness (the Ultimatum Game, the Dictator Game, the Punishment Game, cooperation games such as the Prisoner’s Dilemma) and a revisit of the Endowment Effect as exemplified by the trading of Mugs with capital M. Then Thaler attacks Finance and the Efficient Market Hypothesis in Particular.
Not that anybody sane thinks markets are efficient, but you could tear out the rest of the book and keep pages 203 to 253 as a quick guide to why markets are inefficient. Thaler starts with Keynes’ “beauty contest” analogy for stock picking (we pick the girl we think most other people will like, not the one we really fancy). Next he explains why a stock ought to be worth the net present value of its dividends and takes the reader through Shiller’s discovery that stocks move around tons more than dividends do (or can be reasonably expected to do), which proves they wander around tons relative to what they will ever pay out. He offers additional proof by going through closed-end funds’ variation from their NPV and gets some serious kicks from pointing out that stocks on occasion sell for less than the market value of their listed subsidiaries. He’s a bit of a showman, Thaler, he calls this “negative stock prices.”
From there he goes for the kill and notes that Royal Dutch Shell shares have a different price in New York versus Europe, and never more so than they did during the blow-up of LTCM, providing a real-life example of Shleifer and Vishny’s mathematical formalization of Keynes’ old aphorism that “the market can stay irrational for longer than you can stay solvent.”
At some point, Chicago had to follow Al Pacino’s view that “you keep your friends close and your enemies closer” and put him on the faculty. From his angle, it was time to storm the citadel, and this is what Thaler chronicles next.
He had been ready for them from day one. The book actually starts with “The Gauntlet,” which is the series of challenges orthodox economists lay out for the behavioral crowd:
1. The “As If” challenge states that even if nobody is an expert in everything, society operates as if we all were, because through division of labor we all end up doing things we understand.
2. The “Incentives” challenge states that people respond to incentives once the stakes are large enough. All the wishy washy behavioral stuff washes away once we’re talking real money.
3. The “Learning” challenge states that even if we get it wrong in “one-shot” games, in real life most games are “repeated” and behavior thus converges to what Orthodox Economics would suggest.
4. The “Invisible Hand” argument states that if we all go about doing what’s best for us we nevertheless end up doing what’s right for everyone else as well.
Won’t spoil it for you and take you through Thaler’s answers to the above. It’s after all what the book is really all about. But forgive me one indulgence, I’ve GOT to tell you about the bit where he demolishes Robert Barro:
The Rational Expectations Hypothesis has a number of implications, chief amongst them the prediction that fiscal stimulus does not work. If the government writes you a check, the story goes, you know you’ll be taxed for it in the future, so you save it rather than spend it. And the stimulus ends up being a damp squib. Thaler proves the circularity of this argument by suggesting a similarly circular counter-argument: what if the rational agents that compose this economy believed in Keynes’ multiplier? What if they thought the stimulus will work and the economy will fly and their taxes will actually go down? Should they spend TWICE the check they were sent?
From Chicago he goes on to a couple (well-earned) victory laps. He applies Behavioral Economics to Americal Football, where he advised three separate teams on how to conduct their affairs during the annual draft, to game shows he was allowed to set up with Endemol, where he proved that his theories can withstand some pretty high stakes and from there onto “nudging” people to contribute more to their pension and pay their taxes on time.
He ends the book with a wish that one day there will be one Economics again, with the Orthodox Economics of utility maximization and profit maximization as a quaint special case. We’re probably already there.
The field is not as new as Thaler would have you think. There’s bias in this account and it is a bias against those among his predecessors who tried to explain human behavior in a way that was consistent with mainstream economic theory. I’m thinking Gary Becker here (who tried to explain long lines outside empty clubs and packed cheap restaurants alike using an “upward sloping demand curve” and famously sat down to write a paper on suicide when his wife took her own life); I’m thinking the very same Robert Barro that Thaler makes fun of when he describes him as the smartest man ever, but who nonetheless made me understand in his book “Getting it Right” why superstars could get paid so much in a zero-sum game and got confirmation to his theory when Maradona got paid more than the rest of his team, Napoli, put together, and justifiably so because he not only took them to the Campionato, but also deprived much more fancied teams from winning it.
Thaler’s predecessors operated in a world where most Economics books had to start with a chapter explaining why Economics is a science. Of course they had to stick to the utility-maximizing / profit-maximizing orthodoxy! Besides, orthodox economic theory was not all that shabby when it came to predicting human behavior.
By the time Thaler was entering his prime, Economics no longer had to apologize to anybody and was much more open to heresy, of course. It was in a position to withstand additional questioning. Armed with a nice piece of math invented by Tversky and Kahneman it was ready to be taken to the next level.
Thaler takes you through the whole thing in the space of the shortest 358 pages you will ever read. As he promises at the start, he tells it through a bunch of stories, mostly the stories of his collaborations and his epic fights with Economic Orthodoxy.
The book is worth reading for the humor alone. The jokes range from pure slapstick (example p. 128: “we were trying to learn what ordinary citizens, albeit Canadians, think is fair”) to the esoteric inside joke, like when he mentions Vishny is a common co-author of Shleifer (to the best of my knowledge he’s never written a paper without Shleifer). If you’re not laughing the whole time, basically, there are squadrons of jokes flying over your head. My favorite type of humor, relentless repetition, is also very well represented. I lost count of the number of times I read the expression “invisible handwave.” The man is irrepressible, basically. You can’t keep him down.
There’s a sadness that goes with this too, and it’s that this is a bit of a category killer. “Misbehaving” Pareto-dominates all behavioral economics books that precede it in terms of readability, context, scope, you name it. I don’t know what I would do with myself if I was Dan Ariely or if I was Steven Levitt (Roe v. Wade findings notwithstanding), to say nothing of Tim Hartford. They now have to accept that there’s a book out there that beats their entire life’s work on all fronts.
The long problem set masquerading as a re-interpretation of behavioral economics that is Kahneman’s “Thinking Fast and Slow” is the only true exception to the rule, it continues to stand alone, but relative to “Misbehaving” it’s a cop-out. As he told Michael Lewis in the interview that preceded that book, Kahnemann did not want to write the history of the field, he did not want the book to have the feel of one’s last book. So the door was left wide open to Kahneman’s self-admittedly “lazy” student to jump into the breach.
This he has done with gusto.
Prospect Theory (how we are risk averse when we’re winning and risk loving when we’re losing) is taught straight from Tversky and Kahneman’s 1976 graph and is used to explain: (i) transaction utility, including Costco’s business model (ii) sunk costs (i.e. why you will carry on wearing an uncomfortable pair of shoes you paid 300 dollars for) (iii) the endowment effect (including later in the book how it undermines the Coase theorem) and (iv) “gambling with the house’s money” at the casino, versus the fact that outsiders get overpriced toward the end of the day at the racetrack. Bucketing of budgets gets thrown in for free.
Next comes a tutorial on Self-Control. Thaler explains that many humans discount future pleasure (or pain) on a scale that is totally unrelated to how we present-value bond cashflows and mainly operates on three levels: Now (intense), Later (much less intense) and Much Later (only slightly less intense than Later). This leads to preferences that are intertemporally inconsistent, a nightmare to Economic Orthodoxy, but very often true in real life. Heady stuff, and I promise, he makes it clear. He does not use graphs or charts or math. He explains it all with one picture: the famous cover of New Yorker magazine where everything this side of the Hudson is rendered in great detail, New Jersey through to California takes up as much space as West Manhattan and Asia is visible behind. You get that chart, you get how we humans really think about delayed gratification. Genius.
A chapter follows which is a summary of “Thinking Fast and Slow” but without trying to shoehorn the rest of Behavioral Economics into that model.
The next couple chapters deal with Fairness (the Ultimatum Game, the Dictator Game, the Punishment Game, cooperation games such as the Prisoner’s Dilemma) and a revisit of the Endowment Effect as exemplified by the trading of Mugs with capital M. Then Thaler attacks Finance and the Efficient Market Hypothesis in Particular.
Not that anybody sane thinks markets are efficient, but you could tear out the rest of the book and keep pages 203 to 253 as a quick guide to why markets are inefficient. Thaler starts with Keynes’ “beauty contest” analogy for stock picking (we pick the girl we think most other people will like, not the one we really fancy). Next he explains why a stock ought to be worth the net present value of its dividends and takes the reader through Shiller’s discovery that stocks move around tons more than dividends do (or can be reasonably expected to do), which proves they wander around tons relative to what they will ever pay out. He offers additional proof by going through closed-end funds’ variation from their NPV and gets some serious kicks from pointing out that stocks on occasion sell for less than the market value of their listed subsidiaries. He’s a bit of a showman, Thaler, he calls this “negative stock prices.”
From there he goes for the kill and notes that Royal Dutch Shell shares have a different price in New York versus Europe, and never more so than they did during the blow-up of LTCM, providing a real-life example of Shleifer and Vishny’s mathematical formalization of Keynes’ old aphorism that “the market can stay irrational for longer than you can stay solvent.”
At some point, Chicago had to follow Al Pacino’s view that “you keep your friends close and your enemies closer” and put him on the faculty. From his angle, it was time to storm the citadel, and this is what Thaler chronicles next.
He had been ready for them from day one. The book actually starts with “The Gauntlet,” which is the series of challenges orthodox economists lay out for the behavioral crowd:
1. The “As If” challenge states that even if nobody is an expert in everything, society operates as if we all were, because through division of labor we all end up doing things we understand.
2. The “Incentives” challenge states that people respond to incentives once the stakes are large enough. All the wishy washy behavioral stuff washes away once we’re talking real money.
3. The “Learning” challenge states that even if we get it wrong in “one-shot” games, in real life most games are “repeated” and behavior thus converges to what Orthodox Economics would suggest.
4. The “Invisible Hand” argument states that if we all go about doing what’s best for us we nevertheless end up doing what’s right for everyone else as well.
Won’t spoil it for you and take you through Thaler’s answers to the above. It’s after all what the book is really all about. But forgive me one indulgence, I’ve GOT to tell you about the bit where he demolishes Robert Barro:
The Rational Expectations Hypothesis has a number of implications, chief amongst them the prediction that fiscal stimulus does not work. If the government writes you a check, the story goes, you know you’ll be taxed for it in the future, so you save it rather than spend it. And the stimulus ends up being a damp squib. Thaler proves the circularity of this argument by suggesting a similarly circular counter-argument: what if the rational agents that compose this economy believed in Keynes’ multiplier? What if they thought the stimulus will work and the economy will fly and their taxes will actually go down? Should they spend TWICE the check they were sent?
From Chicago he goes on to a couple (well-earned) victory laps. He applies Behavioral Economics to Americal Football, where he advised three separate teams on how to conduct their affairs during the annual draft, to game shows he was allowed to set up with Endemol, where he proved that his theories can withstand some pretty high stakes and from there onto “nudging” people to contribute more to their pension and pay their taxes on time.
He ends the book with a wish that one day there will be one Economics again, with the Orthodox Economics of utility maximization and profit maximization as a quaint special case. We’re probably already there.
July 10, 2015
What is the value of 'Misbehaving' after 'Nudge' and 'Thinking Fast and Slow'? After all, 'Thinking' told us the discovery process by behavior science demigod. 'Nudge' explained how to apply behavior science to practical policy-making.
'Misbehaving' has its value independent from 'Nudge' and 'Thinking'. Unique in 'Misbehaving' is a candid account of the struggle getting recognized when your opinions are different from the establishment, a humble understanding on the fortunate events that helped a young investigator to start - and stand in the field. 'Misbehaving' tells the reader many 'insider baseball' stories -- how Thaler got skinned at conferences / journal submissions (but the tone wasn't vengeful), and how he got back to his feet and respond with empirical evidence (rather than ideological tautology).
'Nudge' and 'Thinking' read like champions writing home from the finishing line or the celebratory after-party, while 'Misbehaving' is Thaler's account of 'life as a professional renegade'. This is part of the appeal: don't we all like a good underdog story? Most of us are, at best, underdogs in our fields, Thaler's humble 'renegade-getting-recognized' story is fuzzily encouraging. In this way, 'Misbehaving' reads like a grand-parent writes to the grand-children: sharing the stories of life, and perhaps planting a vague idea that 'fight-on' could be fun.
'Misbehaving' writing reminds me of Richard Feynman's books in being funny, irreverent, and honest. In the Conclusion chapter, Thaler likened his now mainstream status to 'The lunatics are running the asylum!' -- You won't find exclamations like this in either 'Nudge' or 'Thinking'. It reminds me of Feynman on his safe-cracking, or thoughts of 'cargo cult science'. Thaler comments on a general practice in academia: "As usual after such meetings ... both sides were confident that they had won." Thaler saved some directness for his intellectual opponents -- there is no sugar-coating on what he thought of them ("least scientific"). Yes, it is a little easier to be direct and unapologetic after you have turned mainstream, your collaborators have won the Nobel (and yourself 2 years after publishing this book, in 2017) -- but the book is direct and honest about himself too. Take Thaler recounting how his thesis advisor assessed him: 'We did not expect much of him'. Enjoy!
'Misbehaving' has its value independent from 'Nudge' and 'Thinking'. Unique in 'Misbehaving' is a candid account of the struggle getting recognized when your opinions are different from the establishment, a humble understanding on the fortunate events that helped a young investigator to start - and stand in the field. 'Misbehaving' tells the reader many 'insider baseball' stories -- how Thaler got skinned at conferences / journal submissions (but the tone wasn't vengeful), and how he got back to his feet and respond with empirical evidence (rather than ideological tautology).
'Nudge' and 'Thinking' read like champions writing home from the finishing line or the celebratory after-party, while 'Misbehaving' is Thaler's account of 'life as a professional renegade'. This is part of the appeal: don't we all like a good underdog story? Most of us are, at best, underdogs in our fields, Thaler's humble 'renegade-getting-recognized' story is fuzzily encouraging. In this way, 'Misbehaving' reads like a grand-parent writes to the grand-children: sharing the stories of life, and perhaps planting a vague idea that 'fight-on' could be fun.
'Misbehaving' writing reminds me of Richard Feynman's books in being funny, irreverent, and honest. In the Conclusion chapter, Thaler likened his now mainstream status to 'The lunatics are running the asylum!' -- You won't find exclamations like this in either 'Nudge' or 'Thinking'. It reminds me of Feynman on his safe-cracking, or thoughts of 'cargo cult science'. Thaler comments on a general practice in academia: "As usual after such meetings ... both sides were confident that they had won." Thaler saved some directness for his intellectual opponents -- there is no sugar-coating on what he thought of them ("least scientific"). Yes, it is a little easier to be direct and unapologetic after you have turned mainstream, your collaborators have won the Nobel (and yourself 2 years after publishing this book, in 2017) -- but the book is direct and honest about himself too. Take Thaler recounting how his thesis advisor assessed him: 'We did not expect much of him'. Enjoy!
April 9, 2016
Thaler was one of the people who brought behavioural economics into being - and this book covers the story of his journey. He says that classic economics describes man as a logical creature, and bases its theories upon this idealised figure. In behavioural economics on the other hand, humans do a lot of misbehaving.
Herewith some odd nuggets and asides I picked from the book.
Unlike most people I found this book a so-so read, I wasn't all that gripped. I skipped the section on stocks and shares...
Herewith some odd nuggets and asides I picked from the book.
Unlike most people I found this book a so-so read, I wasn't all that gripped. I skipped the section on stocks and shares...
December 20, 2022
Richard H. Thaler is the author of Misbehaving: The Making of Behavioral Economics is the book tool on an incredible reading journey of academic language, economics, and human behavior. Hypothesis, experiments, and academic life-changing discussions. This book might be helpful to your English Language learning process, as it can be an excellent example of academic papers.
December 2, 2015
First book I've returned to Audible (and Audible makes that astonishingly easy. not that I expect to need to do it often, but, my gosh, just a click and they send me back my money. impressive).
As my three star rating indicates, this is not a Bad book at all. I listened to it for a little less than three hours, I think, and the bits about behavioral economics were really fun. I enjoyed Thaler's stories about the irrational financial choices people make, which he presents in contrast with the ideal, logical choices which traditional economists assume people will act on. Unfortunately, the book is not about behavioral economics but, rather, as the title clearly indicates, about the Making of the field. The author was evidently a central figure in the development of this branch of economics, and the greater part of the book, as far as I got in it, is about his career and efforts to bring other economists to see things from his point of view. He spends a lot of time talking about other economists and their specialties and interests, giving credit to those who contributed to his developing ideas. He talks about how he got jobs at various universities, who he worked with, the papers they wrote, the walks they took, etc. Which might possibly be of interest to me if I knew enough about economics to recognize (and be impressed by) all the significant figures he mentions. But I don't. So. Not bad, just too specialized or outside my areas of interest.
As my three star rating indicates, this is not a Bad book at all. I listened to it for a little less than three hours, I think, and the bits about behavioral economics were really fun. I enjoyed Thaler's stories about the irrational financial choices people make, which he presents in contrast with the ideal, logical choices which traditional economists assume people will act on. Unfortunately, the book is not about behavioral economics but, rather, as the title clearly indicates, about the Making of the field. The author was evidently a central figure in the development of this branch of economics, and the greater part of the book, as far as I got in it, is about his career and efforts to bring other economists to see things from his point of view. He spends a lot of time talking about other economists and their specialties and interests, giving credit to those who contributed to his developing ideas. He talks about how he got jobs at various universities, who he worked with, the papers they wrote, the walks they took, etc. Which might possibly be of interest to me if I knew enough about economics to recognize (and be impressed by) all the significant figures he mentions. But I don't. So. Not bad, just too specialized or outside my areas of interest.
February 17, 2018
For someone without any background in economics before, this book is an eye-opener. It gives me many tools that I'm sure I can effectively use to argue with my friends in the future. It's also an easy read. Richard has many interesting stories to tell, each with many lessons to learn from.
December 31, 2017
This book is by Richard Thaler, one of the founders of the field of behavioral economics. When he first started getting into this field, he faced mountainous obstacles, mostly from his fellow economists. For many years, he collaborated with Daniel Kahneman and Amos Tversky, who are famous for the book Thinking, Fast and Slow. In 2017, Thaler received the Nobel Prize in economics, for his work in understanding the realities of economic decision making.
This book is enjoyable and engaging, and is packed with interesting anecdotes. Perhaps he goes a little overboard, in describing his personal story and his interactions with Kahneman and Tversky; there is a little bit too much of this, and it almost feels like name-dropping. The book is mostly about the development and history of behavioral economics, rather than the subject of behavioral economics itself. On the other hand, I also very much enjoyed reading one of his previous books, Nudge: Improving Decisions About Health, Wealth, and Happiness.
This book is enjoyable and engaging, and is packed with interesting anecdotes. Perhaps he goes a little overboard, in describing his personal story and his interactions with Kahneman and Tversky; there is a little bit too much of this, and it almost feels like name-dropping. The book is mostly about the development and history of behavioral economics, rather than the subject of behavioral economics itself. On the other hand, I also very much enjoyed reading one of his previous books, Nudge: Improving Decisions About Health, Wealth, and Happiness.
July 17, 2024
Though we think of ourselves as an intelligent species, Humans are not always rational. Thaler gives us many examples of how people make choices that don't make sense, beginning with chances to win and loss-risk avoidance. Contrasting Humans with Econs, or fully rational scientifically-minded people who would make only the "correct" choices when it comes to economic behaviors, Thaler shows us how the invisible hand of the market isn't as efficient as the old-style economists would have us believe.
With humor and sympathy, he shows us how his own personal interest in anomalies of people making choices (or not) that go against their interests can resonate out into society that needs or should be addressed by corporate or government policies. Very early in his academic career, he was compiling examples of Human "misbehaviors," and essentially took them in hand to experiment and figure out what was going on and why. Incredibly, he credibly helped create a field of study that incorporates psychology and economics into much more realistic and plausible practices and policies intended to help Humans do the right thing (such as save for retirement) or make the "right" choices more easily (default choice to opt-in to save, along with a default investment directive, rather than filling out forms to make all those selections). These kinds of changes in policy to help they call "nudges" - not mandates because economic freedom of choice is an absolute must-have in psychology. (Nudges was Thaler's earlier bestseller and groundbreaking book co-authored with Cass Sunstein.)
Along the way in Misbehaving we learn about some of the greatest economic minds of the last 50 years, some of the infighting among economists who were opposed to questioning the fundamental beliefs of the market, and a lot of fortuitous collaborations trying to make society a little better for everyone. It made for a great trip and a very enjoyable read.
4 1/2 stars.
Nobel laureate.
With humor and sympathy, he shows us how his own personal interest in anomalies of people making choices (or not) that go against their interests can resonate out into society that needs or should be addressed by corporate or government policies. Very early in his academic career, he was compiling examples of Human "misbehaviors," and essentially took them in hand to experiment and figure out what was going on and why. Incredibly, he credibly helped create a field of study that incorporates psychology and economics into much more realistic and plausible practices and policies intended to help Humans do the right thing (such as save for retirement) or make the "right" choices more easily (default choice to opt-in to save, along with a default investment directive, rather than filling out forms to make all those selections). These kinds of changes in policy to help they call "nudges" - not mandates because economic freedom of choice is an absolute must-have in psychology. (Nudges was Thaler's earlier bestseller and groundbreaking book co-authored with Cass Sunstein.)
Along the way in Misbehaving we learn about some of the greatest economic minds of the last 50 years, some of the infighting among economists who were opposed to questioning the fundamental beliefs of the market, and a lot of fortuitous collaborations trying to make society a little better for everyone. It made for a great trip and a very enjoyable read.
4 1/2 stars.
Nobel laureate.
July 25, 2015
I have mixed feelings about this book. I wrote a brief article about how college doesn't teach you anything, and to my horror I realized that I already learned most of what this book has to say. For someone without any background in behavioral economics, I recommend reading this in conjunction with Thinking Fast and Slow, the two books will pretty much teach you everything you need to know.
Having studied most of the points mentioned in the book (as well as reading several of the papers summarized) I enjoyed the book mainly for the anecdotes and fun tidbits (for example that the exponential discount function was first posited by the great Samuelson). The book was interesting to me in that it also served as a memoir for Thaler, discussing the various phases of his academic life and his work. I was pleasantly surprised to confirm that Thaler's collection of anomalies was a nod to Kuhn's theory of scientific revolutions. I also heavily agreed with Thaler's emphasis on randomized trials and use of experimental evidence over a priori axioms.
Now for the critique. Thaler seems like a bit of a braggart. He never seems to cease name dropping, and some of his claims seem overreaching. He makes it seem almost like he single-handedly set up behavioral economics. Additionally, the characterization of economists of the more rational mold seem unfair to me. Posner and Miller are reduced to stubborn silly one dimensional characters when both are accomplished and nuanced.
Thaler sets up certain classical problems such as the dividend puzzle, the equity premium puzzle and close ended funds and proclaims them solved by behavioral economics. I read the dividend puzzle paper, and while the "solution" seems reasonable, it has little to no empirical work (ironic, given Thaler's admonishment that "mainstream" economics doesn't look at evidence enough). Thaler claims to have solved the equity premium puzzle by looking at loss aversion rather than risk aversion, and argues that additionally the equity premium puzzle cannot be a risk premium because he looked at the betas of the equity and it didn't explain the equity premium. However, especially after Fama's work, there's widespread agreement that beta does not completely capture risk (it's hard to get a beta of the "market"). Thaler himself recognizes this when he discusses the Fama-French factors and the failure of CAPM. It seems disingenuous to try to refute a possible objection using a risk metric that he knows is not accurate. Lastly, Thaler criticizes Miller for dismissing his work on finding a correlation between close ended funds and small cap equity. It seems like Miller is correct, in that just because Thaler found a correlation, he shouldn't be able to attribute that correlation to investor sentiment. In other words, Thaler presents as fact what is still very controversial in the field.
Even during my studies I always found myself annoyed by Thaler's idea of mental accounting. For the record, I find the concept of mental accounting totally reasonable, and perhaps even true. However, scientifically speaking, it does not seem falsifiable. Any result that does not jive, seems to be able to be explained away, and it seems like mental accounting has little to no predictive power.
At least to me, Thaler needs to propose some empirical tests that can differentiate between behavioral explanation and other explanations. Otherwise, his explanations are as axiomatic as the "mainstream" economics he criticizes.
Having studied most of the points mentioned in the book (as well as reading several of the papers summarized) I enjoyed the book mainly for the anecdotes and fun tidbits (for example that the exponential discount function was first posited by the great Samuelson). The book was interesting to me in that it also served as a memoir for Thaler, discussing the various phases of his academic life and his work. I was pleasantly surprised to confirm that Thaler's collection of anomalies was a nod to Kuhn's theory of scientific revolutions. I also heavily agreed with Thaler's emphasis on randomized trials and use of experimental evidence over a priori axioms.
Now for the critique. Thaler seems like a bit of a braggart. He never seems to cease name dropping, and some of his claims seem overreaching. He makes it seem almost like he single-handedly set up behavioral economics. Additionally, the characterization of economists of the more rational mold seem unfair to me. Posner and Miller are reduced to stubborn silly one dimensional characters when both are accomplished and nuanced.
Thaler sets up certain classical problems such as the dividend puzzle, the equity premium puzzle and close ended funds and proclaims them solved by behavioral economics. I read the dividend puzzle paper, and while the "solution" seems reasonable, it has little to no empirical work (ironic, given Thaler's admonishment that "mainstream" economics doesn't look at evidence enough). Thaler claims to have solved the equity premium puzzle by looking at loss aversion rather than risk aversion, and argues that additionally the equity premium puzzle cannot be a risk premium because he looked at the betas of the equity and it didn't explain the equity premium. However, especially after Fama's work, there's widespread agreement that beta does not completely capture risk (it's hard to get a beta of the "market"). Thaler himself recognizes this when he discusses the Fama-French factors and the failure of CAPM. It seems disingenuous to try to refute a possible objection using a risk metric that he knows is not accurate. Lastly, Thaler criticizes Miller for dismissing his work on finding a correlation between close ended funds and small cap equity. It seems like Miller is correct, in that just because Thaler found a correlation, he shouldn't be able to attribute that correlation to investor sentiment. In other words, Thaler presents as fact what is still very controversial in the field.
Even during my studies I always found myself annoyed by Thaler's idea of mental accounting. For the record, I find the concept of mental accounting totally reasonable, and perhaps even true. However, scientifically speaking, it does not seem falsifiable. Any result that does not jive, seems to be able to be explained away, and it seems like mental accounting has little to no predictive power.
At least to me, Thaler needs to propose some empirical tests that can differentiate between behavioral explanation and other explanations. Otherwise, his explanations are as axiomatic as the "mainstream" economics he criticizes.
April 10, 2018
مشخصات
موضوع: اقتصاد
مولف: ریچارد تیلر
مترجم: بهنام شهائی
ناشرکتاب: مهربان شابک978-600-407-158-1تعداد
تعداد صفحات: 552
نوبت چاپ3
سال چاپ1396
معرفی کتاب از سخن مترجم :
حوزۀ نوظهور «اقتصاد رفتاری»، تلفیق شیرین روانشناسی و اقتصاد دربارۀ فرایند تصمیمگیری انسانها است.
کتاب «کجرفتاری: شکلگیری اقتصاد رفتاری» به زبان ساده، بدون ریاضی و فرمول، و به صورت داستانی برای همۀ انسانهای عادی نوشته شده است. این کتاب بر اساس مطالعات چهلسالهای که بعضاً چندین جایزۀ نوبل را به ارمغان آوردهاند یا چندین برندۀ جایزۀ نوبل را به چالش کشیدهاند، به زبان ساده توسط «ریچارد تِیلِر»، استاد «دانشگاه شیکاگو» و «برندۀ جایزۀ نوبل اقتصاد 2017» که به حق «پدر اقتصاد رفتاری» محسوب میشود، نوشته شده است.
شما در مقام شهروند عادی، روانشناس، مدیر، اقتصاددان، فروشنده، بازاریاب، حقوقدان، و قانونگذار میتوانید از این کتاب برای توصیف و بهبود تصمیمها و رفتارهای خود و دیگران استفاده کنید. اگر میخواهید تصویر واقعبینانهتری از تصمیمها و رفتارهای انسانها به دست بیاورید، به اشتباهات و خطاهای اقتصادی انسانها پی ببرید، تصمیمها و رفتارهای انسانها را تغییر دهید، نحوۀ تأثیرگذاری شرکتها و قانونگذاران بر تصمیمها و رفتارهای خودتان را بدانید، و در دنیای کسبوکار چیزی را به انسانها بفروشید، پس این کتاب را بخرید و بخوانید. برخی از سوالهایی که در این کتاب به آنها پاسخ داده میشود، عبارتند از:
آیا بین اینکه پول اجاره خانه را ماهیانه از جیب بدهیم و یا اینکه از روی سود بانکی سالیانه بپردازیم، فرقی هست؟ (اثر مالکیت)
چگونه آدمها برای وسائل جانبی خودروی گرانقیمت به راحتی پول میدهند؟ (قانون وبر- فشنر)
آیا زیان 100 هزار تومانی و سود 100 هزار تومانی، یکدیگر را خنثی میکنند؟ (نظریۀ چشمداشت)
چرا قیمت یک کالا را مینویسند و بعد از خط زدن، قیمت کمتری زیر آن میآورند؟ (مطلوبیت مبادله)
آیا با وجود سیری، محتوای بشقاب غذای رستوران را تا انتها میخورید؟ (هزینههای هدررفته)
چرا آدمها پول را از دسترس خارج میکنند یا در حسابهای مختلف میگذارند؟ (کلاهبهکلاه نکردن)
چرا آدمها پول بادآورده را راحتتر از پول دسترنج خود خرج میکنند؟ (اثر پول قمارخانه)
چرا آدمها جایزۀ کوچولوی زودتر را به جایزۀ بزرگِ دیرتر ترجیح میدهند؟ (سوگیری به زمان حال)
آیا بهتر نیست قانونی دربارۀ مهلت پسآوردن کالاها و خدمات تصویب شود؟ (دورۀ خنکشدن)
آیا نحوۀ جملهبندی مسئله میتواند تأثیر متفاوتی بر رفتار و واکنش آدمها داشته باشد؟ (اثر قاببندی)
آیا افزایش کرایههای تاکسی در روز بارانی، کار نادرستی است؟ (حساسیت به انصاف)
اگر سهام خاصی ارزشمند است، چرا اینقدر دست به دست میشود؟ (اثر اطمینان بیش از اندازه)
آیا برخورداری از گزینههای بیشتر، بر کیفیت انتخابهای ما میافزاید؟ (سوگیری به وضع موجود)
چرا آدمها در مسابقات تلویزیونی، غیرعقلایی رفتار میکنند؟ (وابستگی مسیر، فرضیۀ بادامزمینی دُرُشت)
آیا باید انسانها را به حال خودشان گذاشت و نیازی به تلنگرزدن نیست؟ (قیممآبی آزادیخواهانه)
آیا بهتر نیست خطمشی اهداء عضو در ایران از «ثبتنام برای اعلام عضویت» به «ثبتنام برای اعلام انصراف» تغییر کند؟ (گزینۀ پیشفرض)
«اقتصاد رفتاری» با طرح سوالات فوق، مدعی است خیلی از رفتارهای جماعت «انسانهای عادی» (سیندرلاها، سیمپسونها) با نظریهها و مدلهای «اقتصاد سنّتی» جور درنمیآیند و در نتیجه انسانها مرتکب کجرفتاری میشوند. بر اساس «اقتصاد رفتاری»، (1) انسانها ظرفیتهای فکری و ذهنی محدودی دارند و برای رفع این محدودیت به میانبُرها متوسّل میشوند، (2) انسانها در برابر وسوسهها خویشتنداری ندارند و به سختی به یک برنامۀ خاص متعّهد میمانند، و (3) انسانها به انصاف و مراعات حال دیگران حساسیت نشان میدهند و برای مجازات بیانصافها حاضرند از نفع خود بگذرند یا به خود ضرر برسانند. به علاوه، «اقتصاد رفتاری» افراد را به سبب «عقلانیت محدود»، «خویشتنداری محدود»، و «خودمنفعتی محدود»، در معرض سوگیریها و اشتباهات پیشبینیپذیر و نیز «آسیبرسانی به خود» میبیند و با پذیرش اصل «قیممابی آزادیخواهانه» توصیه میکند که با دستکاری در محیط انتخاب آدمها (معماری انتخاب) باید به آنها تلنگر زده شود تا به «عقلانیت کامل» برگردند و تصمیمی به نفع خودشان بگیرند. بدینسان، خطِّ فکری «اقتصاد رفتاری» در نُه مفهوم خلاصه میشود: «عقلانیت کامل»، «عقلانیت محدود»، «خویشتنداری محدود»، «خودمنفعتی محدود»، «میانبرها»، «سوگیریها»، «قیممآبی آزادیخواهانه»، «معماری انتخاب»، و «تلنگر».
موضوع: اقتصاد
مولف: ریچارد تیلر
مترجم: بهنام شهائی
ناشرکتاب: مهربان شابک978-600-407-158-1تعداد
تعداد صفحات: 552
نوبت چاپ3
سال چاپ1396
معرفی کتاب از سخن مترجم :
حوزۀ نوظهور «اقتصاد رفتاری»، تلفیق شیرین روانشناسی و اقتصاد دربارۀ فرایند تصمیمگیری انسانها است.
کتاب «کجرفتاری: شکلگیری اقتصاد رفتاری» به زبان ساده، بدون ریاضی و فرمول، و به صورت داستانی برای همۀ انسانهای عادی نوشته شده است. این کتاب بر اساس مطالعات چهلسالهای که بعضاً چندین جایزۀ نوبل را به ارمغان آوردهاند یا چندین برندۀ جایزۀ نوبل را به چالش کشیدهاند، به زبان ساده توسط «ریچارد تِیلِر»، استاد «دانشگاه شیکاگو» و «برندۀ جایزۀ نوبل اقتصاد 2017» که به حق «پدر اقتصاد رفتاری» محسوب میشود، نوشته شده است.
شما در مقام شهروند عادی، روانشناس، مدیر، اقتصاددان، فروشنده، بازاریاب، حقوقدان، و قانونگذار میتوانید از این کتاب برای توصیف و بهبود تصمیمها و رفتارهای خود و دیگران استفاده کنید. اگر میخواهید تصویر واقعبینانهتری از تصمیمها و رفتارهای انسانها به دست بیاورید، به اشتباهات و خطاهای اقتصادی انسانها پی ببرید، تصمیمها و رفتارهای انسانها را تغییر دهید، نحوۀ تأثیرگذاری شرکتها و قانونگذاران بر تصمیمها و رفتارهای خودتان را بدانید، و در دنیای کسبوکار چیزی را به انسانها بفروشید، پس این کتاب را بخرید و بخوانید. برخی از سوالهایی که در این کتاب به آنها پاسخ داده میشود، عبارتند از:
آیا بین اینکه پول اجاره خانه را ماهیانه از جیب بدهیم و یا اینکه از روی سود بانکی سالیانه بپردازیم، فرقی هست؟ (اثر مالکیت)
چگونه آدمها برای وسائل جانبی خودروی گرانقیمت به راحتی پول میدهند؟ (قانون وبر- فشنر)
آیا زیان 100 هزار تومانی و سود 100 هزار تومانی، یکدیگر را خنثی میکنند؟ (نظریۀ چشمداشت)
چرا قیمت یک کالا را مینویسند و بعد از خط زدن، قیمت کمتری زیر آن میآورند؟ (مطلوبیت مبادله)
آیا با وجود سیری، محتوای بشقاب غذای رستوران را تا انتها میخورید؟ (هزینههای هدررفته)
چرا آدمها پول را از دسترس خارج میکنند یا در حسابهای مختلف میگذارند؟ (کلاهبهکلاه نکردن)
چرا آدمها پول بادآورده را راحتتر از پول دسترنج خود خرج میکنند؟ (اثر پول قمارخانه)
چرا آدمها جایزۀ کوچولوی زودتر را به جایزۀ بزرگِ دیرتر ترجیح میدهند؟ (سوگیری به زمان حال)
آیا بهتر نیست قانونی دربارۀ مهلت پسآوردن کالاها و خدمات تصویب شود؟ (دورۀ خنکشدن)
آیا نحوۀ جملهبندی مسئله میتواند تأثیر متفاوتی بر رفتار و واکنش آدمها داشته باشد؟ (اثر قاببندی)
آیا افزایش کرایههای تاکسی در روز بارانی، کار نادرستی است؟ (حساسیت به انصاف)
اگر سهام خاصی ارزشمند است، چرا اینقدر دست به دست میشود؟ (اثر اطمینان بیش از اندازه)
آیا برخورداری از گزینههای بیشتر، بر کیفیت انتخابهای ما میافزاید؟ (سوگیری به وضع موجود)
چرا آدمها در مسابقات تلویزیونی، غیرعقلایی رفتار میکنند؟ (وابستگی مسیر، فرضیۀ بادامزمینی دُرُشت)
آیا باید انسانها را به حال خودشان گذاشت و نیازی به تلنگرزدن نیست؟ (قیممآبی آزادیخواهانه)
آیا بهتر نیست خطمشی اهداء عضو در ایران از «ثبتنام برای اعلام عضویت» به «ثبتنام برای اعلام انصراف» تغییر کند؟ (گزینۀ پیشفرض)
«اقتصاد رفتاری» با طرح سوالات فوق، مدعی است خیلی از رفتارهای جماعت «انسانهای عادی» (سیندرلاها، سیمپسونها) با نظریهها و مدلهای «اقتصاد سنّتی» جور درنمیآیند و در نتیجه انسانها مرتکب کجرفتاری میشوند. بر اساس «اقتصاد رفتاری»، (1) انسانها ظرفیتهای فکری و ذهنی محدودی دارند و برای رفع این محدودیت به میانبُرها متوسّل میشوند، (2) انسانها در برابر وسوسهها خویشتنداری ندارند و به سختی به یک برنامۀ خاص متعّهد میمانند، و (3) انسانها به انصاف و مراعات حال دیگران حساسیت نشان میدهند و برای مجازات بیانصافها حاضرند از نفع خود بگذرند یا به خود ضرر برسانند. به علاوه، «اقتصاد رفتاری» افراد را به سبب «عقلانیت محدود»، «خویشتنداری محدود»، و «خودمنفعتی محدود»، در معرض سوگیریها و اشتباهات پیشبینیپذیر و نیز «آسیبرسانی به خود» میبیند و با پذیرش اصل «قیممابی آزادیخواهانه» توصیه میکند که با دستکاری در محیط انتخاب آدمها (معماری انتخاب) باید به آنها تلنگر زده شود تا به «عقلانیت کامل» برگردند و تصمیمی به نفع خودشان بگیرند. بدینسان، خطِّ فکری «اقتصاد رفتاری» در نُه مفهوم خلاصه میشود: «عقلانیت کامل»، «عقلانیت محدود»، «خویشتنداری محدود»، «خودمنفعتی محدود»، «میانبرها»، «سوگیریها»، «قیممآبی آزادیخواهانه»، «معماری انتخاب»، و «تلنگر».
May 18, 2021
หนังสือเล่มนี้น่าจะชื่อว่า A brief history of behavioral economics มากกว่า ใครที่คิดว่าหนังสือจะอธิบายเศรษฐศาสตร์พฤติกรรมแบบ 1 2 3 4 ต้องผิดหวังแน่ ๆ
แต่หนังสือมีความดีงามในตัวมันเอง เพราะมันได้พาไปรู้จักความเป็นมาของวิชาเศรษฐศาสตร์พฤติกรรมซึ่งถือได้ว่าเป็นศาสตร์ที่ใหม่มาก ๆ ในเวลานั้น จะบอกว่าหนังสือเล่มนี้เป็นหนังสือ ประวัติศาสตร์ ของเศรษฐศาสตร์พฤติกรรมก็คงไม่ผิดนัก ใครที่ชอบเศรษฐศาสตร์จะต้องชอบหนังสือเล่มนี้แน่นอน
ตามหลักเศรษฐศาสตร์โดยทั่วไป (เศรษฐศาสตร์บริสุทธิ์) กล่าวว่าคนเราจะไขว่คว้าหาผลประโยชน์ให้ตัวเองอย่างเป็นเหตุเป็นผล และนั้นทำให้กลไกตลาดทำงานได้อย่างมีประสิทธิภาพตามหลัก มือที่มองไม่เห็น ของ Adam Smith ที่เชื่อว่าในตลาดเสรี ราคาถูกจะต้องเสมอ แต่มันจะมีนักเศรษฐศาสตร์มือบอนบางคนที่ชอบทำตัวแปลกแยก เริ่มจากการที่พวกเขาสังเกตเห็นความไม่สมเหตุสมผลในโมเดลเศรษฐศาสตร์ที่บอกว่าตลาดถูกเสมอ โดยเริ่มนำเอาหลักการทางจิตวิทยามาประยุกต์ใช้กับเศรษฐศาสตร์ จนทำให้สุดท้ายแล้ว โมเดลเศรษฐศาสตร์ดั้งเดิมถูกทำลายจนพังพินาศไปในที่สุด และนับแต่นั้นมา เศรษฐศาสตร์ก็เสียซิงไปตลอดกาล
หนังสือเล่มนี้แม้จะเป็นหนังสือกึ่งวิชาการ แต่ก็ยอมรับว่าอ่านสนุกใช้ได้เลย ผู้เขียนซึ่งเป็นนักเศรษฐศาสตร์รางวัลโนเบลสามารถเล่าเรื่อยาก ๆ ให้เข้าได้ได้ง่ายแบบนี้ ใครก็อ่านได้แม้ว่าจะไม่ได้เรียนเศรษฐศาสตร์ มีอ่านยากอยู่บ้างในบางประเด็น แต่โดยรวมก็ยังเป็นหนังสือที่อ่านสนุกอยู่ดี
ปล. หันมามองงานเขียนเชิงวิชาการบ้านเราก็ได้แต่น้อยใจ เพราะอาจารย์เขาเขียนให้แต่คนเก่ง ๆ อ่าน มันไม่เป็นมิตรกับพวกเราคนธรรมดาเลย สุดท้ายแล้วงานเขียนที่ทรงคุณค่าดี ๆ ส่วนใหญ่เลยจึงถูกลืมไว้บนชั้นหนังสือฝุ่นเขรอะเพราะไม่มีใครหยิบมาอ่านอยู่นั่นเอง
July 25, 2021
Insightful, inspiring and funny.
January 10, 2016
I think this would be of interest to academics who want to see how a new field is created.
For learning about "behavioral economics" as a topic, I think other books are better. But all in all, "behavioral economics" is just economists learning about common sense psychology and renaming it as if it were a new thing.
For learning about "behavioral economics" as a topic, I think other books are better. But all in all, "behavioral economics" is just economists learning about common sense psychology and renaming it as if it were a new thing.
May 25, 2015
It was once a cliche that economics theory dealt only with completely rational human beings, under the principle that this was the only way to develop workable models. Even though classical economists, from Smith to Keynes, had acknowledged that human behavior often deviated from the rational, the models persisted in this foundation. I guess the theory was that deviations from the rationale would be okay, because human behavior would vary in random ways, and the rational "average" would still hold.
That this ridiculous assumption has been largely set aside is due to the work of a few remarkable people, such as Daniel Kahnemann (see Thinking, Fast and Slow), Robert Shiller (of Case-Shiller Home Price Index fame), Amos Tversky, and others ... including Richard Thaler, author of this book (and, previously, Nudge). These economists and psychologists bridged the wide gap between these disciplines, and created behavioral economics - demonstrating that, in the real world, humans tend to exhibit the same, non-rational, behavior over and over again. The assumpion that Humans behave like "Econs" is, simply, wrong - and demonstrably so, in real experimentation.
Thaler provides a history of behavioral economics, his role, and that of the other giants. It's a fascinating walk through the creation of a discipline, and a peek into the world of academia, which can be incredibly vain and petty.
Throughout Thaler blends fascinating - if now familiar - stories about human irrationalities, the "Supposedly Irrelevant Factors" across finance, fairness, and many other topics. I especially enjoyed the case study of how the Chicago School of Economics allocated new offices - even though the faculty of this school are all strong rationalists, who would (rationally) auction off kidneys to the highest bidder, they didn't allocate their offices that way at all, but rather by seniority and lottery. What is good for the goose, is not always good for the gander.
If the topic interests you at all, it's a great, great read. Thaler is an engaging, funny author, and he makes difficult topics easy to read. Check it out!
That this ridiculous assumption has been largely set aside is due to the work of a few remarkable people, such as Daniel Kahnemann (see Thinking, Fast and Slow), Robert Shiller (of Case-Shiller Home Price Index fame), Amos Tversky, and others ... including Richard Thaler, author of this book (and, previously, Nudge). These economists and psychologists bridged the wide gap between these disciplines, and created behavioral economics - demonstrating that, in the real world, humans tend to exhibit the same, non-rational, behavior over and over again. The assumpion that Humans behave like "Econs" is, simply, wrong - and demonstrably so, in real experimentation.
Thaler provides a history of behavioral economics, his role, and that of the other giants. It's a fascinating walk through the creation of a discipline, and a peek into the world of academia, which can be incredibly vain and petty.
Throughout Thaler blends fascinating - if now familiar - stories about human irrationalities, the "Supposedly Irrelevant Factors" across finance, fairness, and many other topics. I especially enjoyed the case study of how the Chicago School of Economics allocated new offices - even though the faculty of this school are all strong rationalists, who would (rationally) auction off kidneys to the highest bidder, they didn't allocate their offices that way at all, but rather by seniority and lottery. What is good for the goose, is not always good for the gander.
If the topic interests you at all, it's a great, great read. Thaler is an engaging, funny author, and he makes difficult topics easy to read. Check it out!
May 2, 2016
Yup - this is now (officially) the memoir/autobiography of the 2017 Nobel Prize Winner.....
This was a lot of fun, but it is what it is. It's a career academic writing about his professional journey - basically the story of the evolution of his successful, productive, and (arguably) paradigm shifting lifetime of research - for a popular audience in the context of the intersection of economics and, well, everything related to behavior, which, of course, includes a healthy dose of psychology.
The book holds together nicely, but what makes the book a joy are the examples, anecdotes, and results from empirical research. The topics run the gamut - from retirement savings to household insulation to corporate leadership to the NFL draft to taxation to the bowls of nuts on the table to, for me, the most entertaining, the selection of faculty offices in an elite graduate school.
If you haven't studied or read or thought much about economics, I have no idea how accessible this would be, but it wouldn't surprise me if it would be interesting and thought-provoking for anyone willing to read and question their preconceived notions and ... think.
There's a lot of life inside the ivory tower stuff that I'm guessing plenty of readers will find lies somewhere between inside baseball and too much information and geeks tell all drama, but - at least for me - I found it hugely entertaining.
It was fun reading this soon after enjoying Rodrik's Economics Rules, and I'm guessing anyone that enjoys one will enjoy the other.
Side note: I haven't yet read Nudge, Thaler's well known collaboration with Cass Sunstein, but I'll probably go back and read it at some point. At least based on my experience, this book stands up just fine on its own.
This was a lot of fun, but it is what it is. It's a career academic writing about his professional journey - basically the story of the evolution of his successful, productive, and (arguably) paradigm shifting lifetime of research - for a popular audience in the context of the intersection of economics and, well, everything related to behavior, which, of course, includes a healthy dose of psychology.
The book holds together nicely, but what makes the book a joy are the examples, anecdotes, and results from empirical research. The topics run the gamut - from retirement savings to household insulation to corporate leadership to the NFL draft to taxation to the bowls of nuts on the table to, for me, the most entertaining, the selection of faculty offices in an elite graduate school.
If you haven't studied or read or thought much about economics, I have no idea how accessible this would be, but it wouldn't surprise me if it would be interesting and thought-provoking for anyone willing to read and question their preconceived notions and ... think.
There's a lot of life inside the ivory tower stuff that I'm guessing plenty of readers will find lies somewhere between inside baseball and too much information and geeks tell all drama, but - at least for me - I found it hugely entertaining.
It was fun reading this soon after enjoying Rodrik's Economics Rules, and I'm guessing anyone that enjoys one will enjoy the other.
Side note: I haven't yet read Nudge, Thaler's well known collaboration with Cass Sunstein, but I'll probably go back and read it at some point. At least based on my experience, this book stands up just fine on its own.
April 25, 2016
Of all the books in behavioral economics, this is probably not the one you should read. Unless you are specifically interested in the author Richard Thaler, go ahead and read 'Nudge' instead. As the subtitle says, this book describes how behavioral economics came about and what merit it has - usually in contrast to the 'econs', by which is meant the homo economicus, or rational actors. This is to me very, very interesting (albeit I give the book two stars) and the development is given here from a, more or less, personal point of view by one of its central actors. That being said, there are no real insights to get from this book that cannot be had from some of the better ones out there already.
October 15, 2018
There are many books written about behavioral economics, and quite a few of them were quoted here.
This one is the strong nr.2 on this topic, right after Thinking Fast and Slow by Daniel Kahneman.
I found here many great life examples, and the author let you decide, yes you have time to vote as many people did, where is the border for every decision. This book is also way better than Nudge by the same author, probably just for this reason.
This one is the strong nr.2 on this topic, right after Thinking Fast and Slow by Daniel Kahneman.
I found here many great life examples, and the author let you decide, yes you have time to vote as many people did, where is the border for every decision. This book is also way better than Nudge by the same author, probably just for this reason.
June 21, 2015
هذا الكتاب لواحد من أعلام علم الإقتصاد السلوكي behavioral economics والذي هو مجال اهتمامي، وجلّ قراءاتي المتخصصة.
والكتاب الذي سارعت لقراءته متأثرًا بمكانة الكاتب لم يكن إلّا سيرة علمية للكاتب "ثالر" يطرح فيه مسيرته العلمية وانتقاله من الإقتصاد البحت إلى الإقتصاد السلوكي والذي جاء برموزه و أبحاثه ونتائجه حلًا للتناقضات التي يحملها "الإقتصاد"، حين ينزل من عالم النظريات إلى عالم الحقائق، ومن عالم الأفكار إلى عالم الإنسان.
لم يقدّم الكتاب لي أيّ جديد للأسف، ولا أراه يصلح إلّا لباحثٍ يريد تتبّع بدايات علم الإقتصاد السلوكي ودراسة مقدماته.
والكتاب الذي سارعت لقراءته متأثرًا بمكانة الكاتب لم يكن إلّا سيرة علمية للكاتب "ثالر" يطرح فيه مسيرته العلمية وانتقاله من الإقتصاد البحت إلى الإقتصاد السلوكي والذي جاء برموزه و أبحاثه ونتائجه حلًا للتناقضات التي يحملها "الإقتصاد"، حين ينزل من عالم النظريات إلى عالم الحقائق، ومن عالم الأفكار إلى عالم الإنسان.
لم يقدّم الكتاب لي أيّ جديد للأسف، ولا أراه يصلح إلّا لباحثٍ يريد تتبّع بدايات علم الإقتصاد السلوكي ودراسة مقدماته.
May 19, 2015
For me it was more of an biography and a listing of who's who in behavioral economics...
April 24, 2020
I now understand why Richard Thaler sounds triumphant in the film adaptation of The Big Short. Thaler's career was long dedicated to showing that economists grossly overstate human rationality in their optimization charts and graphs. They had for decades dismissed or challenged his work on faulty pretences, often just waving away his research (with an "invisible hand") as inconsequential because, paraphrasing, "when the stakes are high people will be incentivized to evaluate every decision in complex equations." Well, they were wrong.
In Misbehaving: The Making of Behavioral Economics, Richard Thaler tells the story of his career, paper by paper. Many of Thaler's experiments are fun games and thought experiments. If you buy a bottle of wine for $20 and it increases in value as it ages, isn't it wrong to think of the wine as being worth $20? Economists say it is wrong, but they don't seem to live out that analysis.
I envy Thaler's ability to imagine these games, not to mention his ability to make a career of twigging people's noses so productively (I say "productively" to distinguish him from trolls). His work changed economics and his work (with Cass Sunstein) on libertarian paternalism, AKA a "nudge," does seem to produce better policy outcomes. We now use opt-out systems to increase retirement savings and we nudge people when they get their driver's license to sign up for organ donation. These policies work because people are, as Ariely might say, predictably irrational. I wonder if many of us feel the risk of playing games with our culture comes with too high a price. Perhaps we should find ways to create these games--I could not help but recall Juska's Round-Heeled Woman. In her memoir, Juska puts an ad in a literary magazine declaring that she would like to have lots of sex before she turns 66. For the most part, this experiment pays off for Juska, and maybe it shows that we are too risk averse--or at least that we too easily comply with social norms.
By the end of his career, Thaler arrives at the University of Chicago, the neoliberal economics stronghold. He attributes his success to observing, gathering evidence, and speaking up. But I think the book suggests other strategies. First, collaborate well. Thaler works with Cass Sunstein, Daniel Kahneman, and Amos Tversky--you can't do much better than that outside of the Manhattan Project. Second, seek strategies for amplification. Thaler often relies on humor to ask questions; if economics says X, why do we see Y? Third, maybe we should default to forming our arguments as questions given to experimentation. I see that as a skill that's not easy to replicate, however.
A final note. My favorite chapter detailed what happened when the Chicago economists moved into a new building and therefore had to pick their offices. The griping and whining is hilarious, and the only focus for these rational minds seemed to be status as they fought to get corner offices or offices with a nice view. If anyone prioritized privacy and quiet (my first choice would be in a windowless basement next to a janitorial station) to do their serious work, their voice was not included. But I suspect that we would do well to mostly think of scholars as squabbling status monsters.
And that goes for Thaler as well. There is an underdog quality to much of this memoir, and Thaler gets the last laugh after toiling away in an obscure academic hideout known to the backwater locals as Cornell University. I say this last sentence to emphasize that while I understand Thaler's "last laugh" tone (he would go on to win the "Nobel Prize" in Economics in 2017, btw), I sometimes found it a bit much to pity this poor professor who spent much of his career at Cornell. Although I mostly admire this book, I was able to finish several other more engaging works while reading it.
In Misbehaving: The Making of Behavioral Economics, Richard Thaler tells the story of his career, paper by paper. Many of Thaler's experiments are fun games and thought experiments. If you buy a bottle of wine for $20 and it increases in value as it ages, isn't it wrong to think of the wine as being worth $20? Economists say it is wrong, but they don't seem to live out that analysis.
I envy Thaler's ability to imagine these games, not to mention his ability to make a career of twigging people's noses so productively (I say "productively" to distinguish him from trolls). His work changed economics and his work (with Cass Sunstein) on libertarian paternalism, AKA a "nudge," does seem to produce better policy outcomes. We now use opt-out systems to increase retirement savings and we nudge people when they get their driver's license to sign up for organ donation. These policies work because people are, as Ariely might say, predictably irrational. I wonder if many of us feel the risk of playing games with our culture comes with too high a price. Perhaps we should find ways to create these games--I could not help but recall Juska's Round-Heeled Woman. In her memoir, Juska puts an ad in a literary magazine declaring that she would like to have lots of sex before she turns 66. For the most part, this experiment pays off for Juska, and maybe it shows that we are too risk averse--or at least that we too easily comply with social norms.
By the end of his career, Thaler arrives at the University of Chicago, the neoliberal economics stronghold. He attributes his success to observing, gathering evidence, and speaking up. But I think the book suggests other strategies. First, collaborate well. Thaler works with Cass Sunstein, Daniel Kahneman, and Amos Tversky--you can't do much better than that outside of the Manhattan Project. Second, seek strategies for amplification. Thaler often relies on humor to ask questions; if economics says X, why do we see Y? Third, maybe we should default to forming our arguments as questions given to experimentation. I see that as a skill that's not easy to replicate, however.
A final note. My favorite chapter detailed what happened when the Chicago economists moved into a new building and therefore had to pick their offices. The griping and whining is hilarious, and the only focus for these rational minds seemed to be status as they fought to get corner offices or offices with a nice view. If anyone prioritized privacy and quiet (my first choice would be in a windowless basement next to a janitorial station) to do their serious work, their voice was not included. But I suspect that we would do well to mostly think of scholars as squabbling status monsters.
And that goes for Thaler as well. There is an underdog quality to much of this memoir, and Thaler gets the last laugh after toiling away in an obscure academic hideout known to the backwater locals as Cornell University. I say this last sentence to emphasize that while I understand Thaler's "last laugh" tone (he would go on to win the "Nobel Prize" in Economics in 2017, btw), I sometimes found it a bit much to pity this poor professor who spent much of his career at Cornell. Although I mostly admire this book, I was able to finish several other more engaging works while reading it.
November 3, 2018
Ha vinto il Nobel per l'economia, ma potrebbe giocarselo pure per la letteratura, tanto è scritto in modo chiaro ed avvincente.
Sarà che tornare sugli studi compiuti senza l'assillo del risultato riconcilia con la materia;
Sarà che i relativi esami sono fondamentali per la laurea, ma poi, sul lavoro, solitamente non si mettono in pratica;
Sarà che, come tutte le altre scienze, anche l'economia va avanti e uno della mia età è arrivato, al massimo, a Modigliani.
Tutto ciò premesso, certe nuove scoperte mi hanno lasciato a bocca aperta ed hanno riacceso la mia antica passione: ho già iniziato "Keynes e Von Hayek" di Wapshott.
Mi voglio spingere oltre: il nostro paese è afflitto da una disperata carenza di cultura economica.
Per chi fosse interessato a colmare la lacuna, questo sarebbe davvero l'esordio ideale.
Basta capire il significato del titolo e, poi, la lettura scorre in discesa, ma non per questo mancano i riferimenti ai grandi economisti che hanno fatto la storia della materia.
Sarà che tornare sugli studi compiuti senza l'assillo del risultato riconcilia con la materia;
Sarà che i relativi esami sono fondamentali per la laurea, ma poi, sul lavoro, solitamente non si mettono in pratica;
Sarà che, come tutte le altre scienze, anche l'economia va avanti e uno della mia età è arrivato, al massimo, a Modigliani.
Tutto ciò premesso, certe nuove scoperte mi hanno lasciato a bocca aperta ed hanno riacceso la mia antica passione: ho già iniziato "Keynes e Von Hayek" di Wapshott.
Mi voglio spingere oltre: il nostro paese è afflitto da una disperata carenza di cultura economica.
Per chi fosse interessato a colmare la lacuna, questo sarebbe davvero l'esordio ideale.
Basta capire il significato del titolo e, poi, la lettura scorre in discesa, ma non per questo mancano i riferimenti ai grandi economisti che hanno fatto la storia della materia.
October 19, 2017
It's hard to find a book where the author and his ego spend so much time trying to present themselves as so important. Most of the substance in Misbehaving (And Thaler's life's work, it appears) is wholly derived from Khahneman and Tversky, and the more worthy Thinking, Fast and Slow - which nearly every reader would be better with spending their time with. Anything worth looking at here could be easily found by googling Thaler's past New York Times pieces - they contain the same content. The rest is the history of Thaler's personal life moving around the country, childish sniping at academic opponents (who's arguments I genuinely wanted to encounter, without all of the straw men), and reminders about what a scholarly rascal he is. At the end of the day, I still don't believe I've been presented with a coherent case for what Behavioral Economics is, outside of a parasitic, negative attack on the classical models.
April 26, 2017
يحكي الكاتب قصة تخصص الإقتصاد السلوكي
Behavioural Economics
من بداياته وحتى أن تأسس علم كامل باسمه.
يروي المؤلف ذلك من خلال سرد قصة حياته في الجامعة ويسير بالسرد بالزمن إلى فترة عمله في الأبحاث السلوكية، ومن ثم تأليفه لكتاب الدفشة وكيف بدأ بمساعدة الحكومات بالتأثير على الناس وجعلهم يختارون خيارات أفضل في حياتهم من خلال هندسة الخيارات لتكون مقنعة
الكتاب طويل بشكل مبالغ فيه، ويحوي صعوبة خاصة في الأبحاث التي يسردها. لكنه ممتع ويعلم الكثير
Behavioural Economics
من بداياته وحتى أن تأسس علم كامل باسمه.
يروي المؤلف ذلك من خلال سرد قصة حياته في الجامعة ويسير بالسرد بالزمن إلى فترة عمله في الأبحاث السلوكية، ومن ثم تأليفه لكتاب الدفشة وكيف بدأ بمساعدة الحكومات بالتأثير على الناس وجعلهم يختارون خيارات أفضل في حياتهم من خلال هندسة الخيارات لتكون مقنعة
الكتاب طويل بشكل مبالغ فيه، ويحوي صعوبة خاصة في الأبحاث التي يسردها. لكنه ممتع ويعلم الكثير
May 15, 2015
This was a really fun read. It gives kind of a behind the scenes look at how the field came about from one of the most prominent creators of the field.
March 13, 2024
This book captures the history, importance, reluctancy, and overall wide spread presence and necessity of behavioral economics in many aspects of life and government, while exploring interesting theories and concepts using thought-provoking stories and experiments with first hand experiences from a detailed view of Richard Thaler’s life. 4.3ish
May 26, 2023
کتاب بیشتر در مورد مقالات ارایه شده دانشگاهی بود که از لحاظ موضوع پراکنده بودند و توضیح خیلی مختصری هم در موردش نوشته شده بود . کتاب به هیچ وجه عمقی نبود و از این شاخه به اون شاخه پریدن نویسنده خواندن کتاب رو کسالت آور کرده بود.
July 14, 2026
I enjoyed the autobiographical, anecdote-laden approach to explaining much of the development of the now-recognized field of Behavioral Economics as well as the gentle evisceration of all the principles of classical economics I always found exceedingly dubious if not downright offensive.
In my view, however, what is missing is the "Why"- i.e. why are humans so predisposed to behave in ways that economists consider irrational? Could there just be more to life than just maximizing profit while minimizing liabilities? Remains to be defined, I guess.
In my view, however, what is missing is the "Why"- i.e. why are humans so predisposed to behave in ways that economists consider irrational? Could there just be more to life than just maximizing profit while minimizing liabilities? Remains to be defined, I guess.
December 9, 2019
Misbehaving is the story of how behavioral economics, a new and seemingly radical branch of economics, came to be. For those not too well-versed in economic theory, suffice it to say that one of its foundations is the assumption that we, humans, are rational creatures - and not just rational, but completely rational: at all times and under any and all circumstances. Quite the wild assumption, huh? Well, behavioral economics puts economic's main assumption to the test and proposes that, surprise surprise, we're not really that rational.
When I was studying economics, this assumption was quickly drilled into my brain in every class. The way I took it was: "surely we’re not completely rational, and surely we all know that much, but this is a simplification - the models are all supposed to be a simplification of life so we first learn the basics and then keep on adding on." So imagine my surprise when Thaler, one of the pioneers of behavioral economics, told of his (rather fancy and intellectual) battles against some of the most conservative economists who refused to even entertain the idea of us, mere mortals, not being as rational as the theory has been stating for ages. Little had I imagined that something that for me was crystal clear (although I didn’t know about behavioral economics by then), was considered heresy by so many big names in the field. And I’m not saying I am enlightened or anything of the sort - God knows how much I struggled - but I guess once you’re a hard-core theorist, seeing the world through a different lens can be close to impossible. Plus, there was no way I could believe myself or those around me to be that rational, to be honest. I mean, have you seen the state of the world?
Surely by now (if not by the first sentence already) I’ve lost the interest of many of you, and I get it. Economics isn’t the most thrilling of topics on any given day, and a book about how some of the theory came to be while a big chunk of what has been taught over decades had to be revised isn’t exactly a page-turner. But, believe it or not, behavioral economics can be way more interesting than your run-of-the-mill economics. Combining economics with psychology, it shows that we’re not nearly as rational as we want to believe. Ever since I read Emotional Intelligence and then Thinking, Fast and Slow, I’ve been fascinated by cognitive errors and the role that psychology, emotion, culture and social factors play when we’re making day-to-day decisions.
Unlike Thinking, Fast and Slow, Misbehaving isn’t a collection of studies, hypotheses, results and analysis. It is, as I said, an account of how behavioral economics came to be, although it does mention more than a couple of important studies or discoveries to make a point whenever necessary. To be completely honest, I picked this book up for the first time over two year ago and, since I was expecting it to be closer to Thinking, Fast and Slow than it is, I put it aside. Knowing better what to expect this time, I went in with a more open mind and ended up enjoying it immensely.
Bonus points: 1) Thaler inserts a bit of humor every now and then that I wasn’t really expecting. It’s not a laugh out loud kind of humor but this is a book about economics so you shouldn’t be expecting so much and 2) you really don’t need to be an economist (or knowing all that much about economic theory for that matter) to understand and enjoy this book (although I’m pretty sure it helps). If you enjoyed Kahneman’s Thinking, Fast and Slow, or are simply curious as to why we so often make silly decisions, then the chances of your liking this one are looking good.
“The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.”
When I was studying economics, this assumption was quickly drilled into my brain in every class. The way I took it was: "surely we’re not completely rational, and surely we all know that much, but this is a simplification - the models are all supposed to be a simplification of life so we first learn the basics and then keep on adding on." So imagine my surprise when Thaler, one of the pioneers of behavioral economics, told of his (rather fancy and intellectual) battles against some of the most conservative economists who refused to even entertain the idea of us, mere mortals, not being as rational as the theory has been stating for ages. Little had I imagined that something that for me was crystal clear (although I didn’t know about behavioral economics by then), was considered heresy by so many big names in the field. And I’m not saying I am enlightened or anything of the sort - God knows how much I struggled - but I guess once you’re a hard-core theorist, seeing the world through a different lens can be close to impossible. Plus, there was no way I could believe myself or those around me to be that rational, to be honest. I mean, have you seen the state of the world?
“What makes the bias particularly pernicious is that we all recognize this bias in others but not in ourselves.”
Surely by now (if not by the first sentence already) I’ve lost the interest of many of you, and I get it. Economics isn’t the most thrilling of topics on any given day, and a book about how some of the theory came to be while a big chunk of what has been taught over decades had to be revised isn’t exactly a page-turner. But, believe it or not, behavioral economics can be way more interesting than your run-of-the-mill economics. Combining economics with psychology, it shows that we’re not nearly as rational as we want to believe. Ever since I read Emotional Intelligence and then Thinking, Fast and Slow, I’ve been fascinated by cognitive errors and the role that psychology, emotion, culture and social factors play when we’re making day-to-day decisions.
Unlike Thinking, Fast and Slow, Misbehaving isn’t a collection of studies, hypotheses, results and analysis. It is, as I said, an account of how behavioral economics came to be, although it does mention more than a couple of important studies or discoveries to make a point whenever necessary. To be completely honest, I picked this book up for the first time over two year ago and, since I was expecting it to be closer to Thinking, Fast and Slow than it is, I put it aside. Knowing better what to expect this time, I went in with a more open mind and ended up enjoying it immensely.
Bonus points: 1) Thaler inserts a bit of humor every now and then that I wasn’t really expecting. It’s not a laugh out loud kind of humor but this is a book about economics so you shouldn’t be expecting so much and 2) you really don’t need to be an economist (or knowing all that much about economic theory for that matter) to understand and enjoy this book (although I’m pretty sure it helps). If you enjoyed Kahneman’s Thinking, Fast and Slow, or are simply curious as to why we so often make silly decisions, then the chances of your liking this one are looking good.
June 25, 2019
This is mostly a memoir wherein the author charts his charmed life in the manner of a humble braggart, but the first 1/3 of the book presents some interesting ideas and theories that leave me wanting to sound more like a behavioral economist when dealing with the hoi polloi that plague me in my day-to-day life (which, to be fair, simply makes me the contrarian acolyte of a humble braggart).
Constrained optimization: the process of optimizing an objective function with respect to some variables in the presence of constraints on those variables.
Sunk cost: a cost that has already been incurred and cannot be recovered.
Bounded rationality: the idea that rationality is limited when individuals make decisions (by the tractability of the decision problem, the cognitive limitations of the mind, and the time available to make the decision).
Hindsight bias (aka the "knew-it-all-along phenomenon" and/or "creeping determinism"): the tendency for people to perceive events that have already occurred as having been more predictable than they actually were before the events took place.
Descriptive statistic: a summary statistic that quantitatively describes or summarizes features of a collection of information. (It helps describe, show, or summarize data in a meaningful way such that, for example, patterns might emerge from the data.)
Proscpect theory: theory in cognitive psychology that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are uncertain. The theory states that people make decisions based on the potential value of losses and gains rather than the final outcome and that people evaluate these losses and gains using heuristics.
Heuristic: any approach to problem-solving or self-discovery that employs a practical method, not guaranteed to be optimal, perfect, logical, or rational, but instead sufficient for reaching an immediate goal (i.e., a rule of thumb). Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution.
Loss aversion: people's tendency to prefer avoiding losses to acquiring equivalent gains (i.e., it's better to find $5 than lose $5).
Mental accounting: the process by which people code, categorize, and evaluate economic outcomes, the purpose of which is to keep track of our money-related decisions so as to give us a model with which to evaluate future financial decisions.
Normativity: an evaluative phenomenon by which societies designate some actions or outcomes as good or desirable and other actions as bad or undesirable (i.e., what is normally done, or what most others are expected to do in practice).
Opportunity cost: when an option is chosen from two (or more) mutually exclusive alternatives, the opportunity cost is what is incurred by not enjoying the benefit associated with an alternative choice.
Fungible: Mutually interchangable (an example is currency).
Null hypothesis: a general statement or default position that there is no relationship between two measured phenomena or no association among groups (i.e., all phenomena take place in a vacuum). It is generally assumed to be true until evidence indicates otherwise.
Status quo bias: a preference for the current state of affairs (an emotional bias).
Mean reversion: the assumption that a stock's price will tend to move to the average price over time. (Strikes me as a corollary of the hedonic treadmill, the tendency of humans to return to a relatively stable level of happiness despite major positive or negative life events or changes).
Constrained optimization: the process of optimizing an objective function with respect to some variables in the presence of constraints on those variables.
Sunk cost: a cost that has already been incurred and cannot be recovered.
Bounded rationality: the idea that rationality is limited when individuals make decisions (by the tractability of the decision problem, the cognitive limitations of the mind, and the time available to make the decision).
Hindsight bias (aka the "knew-it-all-along phenomenon" and/or "creeping determinism"): the tendency for people to perceive events that have already occurred as having been more predictable than they actually were before the events took place.
Descriptive statistic: a summary statistic that quantitatively describes or summarizes features of a collection of information. (It helps describe, show, or summarize data in a meaningful way such that, for example, patterns might emerge from the data.)
Proscpect theory: theory in cognitive psychology that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are uncertain. The theory states that people make decisions based on the potential value of losses and gains rather than the final outcome and that people evaluate these losses and gains using heuristics.
Heuristic: any approach to problem-solving or self-discovery that employs a practical method, not guaranteed to be optimal, perfect, logical, or rational, but instead sufficient for reaching an immediate goal (i.e., a rule of thumb). Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution.
Loss aversion: people's tendency to prefer avoiding losses to acquiring equivalent gains (i.e., it's better to find $5 than lose $5).
Mental accounting: the process by which people code, categorize, and evaluate economic outcomes, the purpose of which is to keep track of our money-related decisions so as to give us a model with which to evaluate future financial decisions.
Normativity: an evaluative phenomenon by which societies designate some actions or outcomes as good or desirable and other actions as bad or undesirable (i.e., what is normally done, or what most others are expected to do in practice).
Opportunity cost: when an option is chosen from two (or more) mutually exclusive alternatives, the opportunity cost is what is incurred by not enjoying the benefit associated with an alternative choice.
Fungible: Mutually interchangable (an example is currency).
Null hypothesis: a general statement or default position that there is no relationship between two measured phenomena or no association among groups (i.e., all phenomena take place in a vacuum). It is generally assumed to be true until evidence indicates otherwise.
Status quo bias: a preference for the current state of affairs (an emotional bias).
Mean reversion: the assumption that a stock's price will tend to move to the average price over time. (Strikes me as a corollary of the hedonic treadmill, the tendency of humans to return to a relatively stable level of happiness despite major positive or negative life events or changes).
October 29, 2017
A lot of books in my kindle collection were free downloads from a while back, which would cost anywhere from 0.99$ to 3.99$ if I were to buy them now. I also bought a few books for 0.99$. I recently went through my collection and books that no longer interest me, some of which I have never read. I realized that I deleted only books that I downloaded for free and none of the ones purchased. That is what Thaler calls misbehaving. The value of a book is how much it would cost to replace is now - not how much I paid for it back then. To sink the idea in, think about the following scenario: what if Amazon mistakenly deleted some books from your account. How much would you want as compensation? The amount it takes to replace those books? Or what you paid when you purchased them?
This book feels like an evening drinking wine with Thaler recounting his career. He is a great story teller and full of fun anecdotes. I learned a little bit of behavioral economics but I wanted more. The beginning and his list of anomalies - things people do that are contrary to good economics rationale - was fascinating. But the book is more of a history of the development of field than a discussion of the concepts. There is a lot of name dropping of people and conferences who shaped the field. I guess I will have to go read Nudge now.
This book feels like an evening drinking wine with Thaler recounting his career. He is a great story teller and full of fun anecdotes. I learned a little bit of behavioral economics but I wanted more. The beginning and his list of anomalies - things people do that are contrary to good economics rationale - was fascinating. But the book is more of a history of the development of field than a discussion of the concepts. There is a lot of name dropping of people and conferences who shaped the field. I guess I will have to go read Nudge now.
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