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Misbehaving: The Making of Behavioral Economics Paperback – June 14, 2016
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“A sly and somewhat subversive history of [the economics] profession . . . engrossing and highly relevant.”
- Jonathan A. Knee, New York Times
“Highly enjoyable . . . dense with fascinating examples. . . . It is long past time to replace Econs with Humans, both in theory and in the practice of prediction.”
- Carol Tavris, Wall Street Journal
“A dryly humorous history of the revolution [Thaler] helped ignite, as well as a useful (if sometimes challenging) primer on its key concepts.”
- Julia M. Klein, Chicago Tribune
“[A] masterful, readable account of behavioral economics. Very well done.”
- David Wessel, Pulitzer Prize-winning journalist, author of Red Ink and Ben Bernanke’s War on the Great Panic
“Bound to become a classic. Now established as one of the great figures in the history of economic thought, Thaler has no predecessors. A rebel with a cause . . .[w]here he wins Olympic gold is in keen observation; his greatest insights come from actually looking.”
- Cass Sunstein, New Rambler
“Entertaining…. An excellent read on the shortcomings of classical economic and finance theory.”
- Ronald L. Moy, CFA Institute
“The creative genius who invented the field of behavioral economics is also a master storyteller and a very funny man. All these talents are on display in this wonderful book.”
- Daniel Kahneman, winner of the Nobel Prize in Economics and author of Thinking, Fast and Slow
“The story behind some of the most important insights in modern economics. If I had to be trapped in an elevator with any contemporary intellectual, I’d pick Richard Thaler.”
- Malcolm Gladwell
“Richard Thaler has been at the center of the most important revolution to happen in economics in the last thirty years. In this captivating book, he lays out the evidence for behavioral economics and explains why there was so much resistance to it. Read Misbehaving. There is no better guide to this new and exciting economics.”
- Robert J. Shiller, winner of the Nobel Prize in Economics and author of Finance and the Good Society
About the Author
Richard H. Thaler is the coauthor of the best-selling book Nudge with Cass R. Sunstein, and the author of Quasi Rational Economics and The Winner’s Curse. He is a professor of behavioral science and economics at the University of Chicago Booth School of Business and, in 2015, the president of the American Economic Association.
Top customer reviews
Economics is based on the assumption that people make rational decisions that optimize their decisions. This assumption provides a handy set of axiomatic points to move from, creating all manner of theories of how people go about making choices. It has the enhanced predictive power of other sciences which proceed from a unified theory to explain the varying phenomenon of nature.
Thaler details the problems with rational theory. He explores the early stages of his career as an economist, when he collected counter-instances to the theory of rational expectations. This leads to the first tentative attempts to form other theories about people's choices and behavior which do not make assumptions about their complete rationality. Theories like sunk costs and the fungible nature of money appear to be completely out of sync when tested against the reality of how people consider expenses and money. People make mistakes that are not in their best interests because they do not have complete information, or they act upon emotion rather than correct information.
This book shows the inherent bias in any scientific community. Researchers base their entire careers on looking at a field in a certain way, and are very reluctant to set that view aside. Reputation, position, and power can retard the progress of scientific inquiry. Thaler’s book shows that if enough effort is put behind gathering counter-instances in a field, eventually even the most ardent critic must take note.
As for the omissions, perhaps the most significant relates to what Thaler considers the most important aim of behavioral economics, the gathering of evidence about actual human behavior. There is a relative inattention to field or natural exercises compared to laboratory economics--though the importance of the latter is acknowledged briefly towards the end of the book. A second, and more important shortcoming, is the failure to note the potential of asking decision makers to explain why they made certain decisions; this is being undertaken successfully by Truman Bewley, and is now being given more attention by several of the empirically oriented economists cited in the book. A third is that the "libertarian paternalistic" nudging which has led employees to increase their rate of saving, may not be the best that they could do, which is now being emphasized by others that Thaler also cites. Perhaps a second edition of The Making of Behavioral Economics will take note of these points.
These are minor problems, however. We have a major debt to Richard Thaler for all that he has contributed to the field and for his ability to explain everything in a manner that is really a pleasure to read.
Hugh Schwartz (a behavioral economist)
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Level: Moderate to difficult, depending on your base knowledge of Economics and Psychology.Read more