‘I’d Have Said Let’s Not Do This’: What Osborne Never Asked Richard Thaler by Liam Halligan, The Spectator

An interview with Professor Richard Thaler, godfather of behavioral economics

‘For ten years or so, my name was “that jerk”,’ says Professor Richard Thaler, president of the American Economics Association and principal architect of the behavioral economics movement. ‘But that was a promotion. Before, I was “Who’s he?”’

Thaler has had to get used to putting noses out of joint. His academic research, initially controversial, sparked an entirely new branch of economics, and now governments are adopting his theories across the globe. But he met plenty of resistance along the way. ‘You get your ideas straight when you argue with those whose views are most different from yours,’ he says.

Struggling with his doctorate in the early 1970s, Thaler faced an economics discipline focused on mathematical models that assumed people always behave rationally, driven entirely by market incentives. He fought back, insisting economics should resist too much maths, opening up instead to other social sciences and acknowledging emotion, bias and whim.

‘It’s tough to change people’s minds about their breakfast cereal, let alone economic models they’ve worked on all their lives,’ says Thaler, reflecting on an career that’s taken him from undergraduate studies in Ohio to Stanford and Cornell. For the past 20 years, he’s been at Chicago — once the home of Milton Friedman, still a citadel of free market economics, and a department perhaps unlikely to welcome a cross-disciplinary firecracker like Thaler. ‘I went with my eyes open, and it’s been great,’ he says. ‘What I’ve learnt at Chicago and elsewhere is that adding real people to economic theories isn’t only fun, it also improves the accuracy of your predictions.’

This is behavioral economics — a branch of the subject Thaler now dominates. Unusually for an economist, he and his acolytes openly admit that market-based analysis is flawed. Embracing that reality, the behavioral school combines a practical understanding of financial incentives with concrete findings from psychology — and is thereby revolutionizing the dismal science.

In 2008, Thaler co-authored Nudge: Improving Decisions About Health, Wealth, and Happiness, which highlights how individuals and organizations often make terrible choices — about everything from education to road safety to personal finance. Thaler’s response is ‘soft paternalism’, policies that work with human nature, nudging people towards acting in their own best interests.


An international bestseller, Nudge brought Thaler policy influence, particularly in the UK. After the Tories took office in 2010, he helped set up and run the fabled Behavioral Insights Team in Downing Street (the ‘Nudge Unit’), which continues to play a significant role in British policy-making.

Since 2012, many UK employees have been automatically enrolled into occupational pensions — a policy, lifted from Nudge, that recognizes inertia. Opt-out rates have been small, yielding 90 per cent take-up. The UK tax authorities have also adopted Thaler’s policy, road-tested using psychological experiments, of rewriting letters to late payers to tell them they’re ‘in a small minority who haven’t paid on time’. The changed wording brought in almost 10 per cent more payments.

Thaler tells me proudly of the Nudge Unit’s growth: having started with just five staff, it now has over 100 and is partly privatized, doing work in Singapore, Australia and elsewhere. The White House now has a Nudge Unit, he adds, while the Bill and Melinda Gates Foundation is funding one in India to promote better sanitation.

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Nudge: Improving Decisions About Health, Wealth, and Happiness – Description

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler

For fans of Malcolm Gladwell’s Blink and Nobel Prize winner Daniel Kahneman’s Thinking Fast and Slow, a revelatory new look at how we make decisions

More than 750,000 copies sold

New York Times bestseller
An Economist Best Book of the Year
Financial Times Best Book of the Year

Nudge is about choices—how we make them and how we can make better ones. Drawing on decades of research in the fields of behavioral science and economics, authors Richard H. Thaler and Cass R. Sunstein offer a new perspective on preventing the countless mistakes we make—ill-advised personal investments, consumption of unhealthy foods, neglect of our natural resources—and show us how sensible “choice architecture” can successfully nudge people toward the best decisions. In the tradition of The Tipping Point and FreakonomicsNudge is straightforward, informative, and entertaining—a must-read for anyone interested in our individual and collective well-being.

Review

“How often do you read a book that is both important and amusing, both practical and deep? This gem of a book presents the best idea that has come out of behavioral economics. It is a must-read for anyone who wants to see both our minds and our society working better. It will improve your decisions and it will make the world a better place.”-Daniel Kahneman, Princeton University, Nobel Laureate in Economics (Daniel Kahneman )

“In this utterly brilliant book, Thaler and Sunstein teach us how to steer people toward better health, sounder investments, and cleaner environments without depriving them of their inalienable right to make a mess of things if they want to. The inventor of behavioral economics and one of the nation”s best legal minds have produced the manifesto for a revolution in practice and policy. Nudge won”t nudge you-it will knock you off your feet.”-Daniel Gilbert, professor of psychology, Harvard University, Author of Stumbling on Happiness

“This is an engaging, informative, and thoroughly delightful book. Thaler and Sunstein provide important lessons for structuring social policies so that people still have complete choice over their own actions, but are gently nudged to do what is in their own best interests. Well done.”-Don Norman, Northwestern University, Author of The Design of Everyday Things and The Design of Future Things

“This book is terrific. It will change the way you think, not only about the world around you and some of its bigger problems, but also about yourself.”-Michael Lewis, author of The Blind Side: Evolution of a Game and Liar’s Poker

“Two University of Chicago professors sketch a new approach to public policy that takes into account the odd realities of human behavior, like the deep and unthinking tendency to conform. Even in areas-like energy consumption-where conformity is irrelevant. Thaler has documented the ways people act illogically.”-Barbara Kiviat, Time

“Richard Thaler and Cass Sunstein”s Nudge is a wonderful book: more fun than any important book has a right to be-and yet it is truly both.”-Roger Lowenstein, author of When Genius Failed

“A manifesto for using the recent behavioral research to help people, as well as government agencies, companies and charities, make better decisions.”-David Leonhardt, The New York Times Magazine

“I love this book. It is one of the few books I”ve read recently that fundamentally changes the way I think about the world. Just as surprising, it is fun to read, drawing on examples as far afield as urinals, 401(k) plans, organ donations, and marriage. Academics aren”t supposed to be able to write this well.”-Steven Levitt, Alvin Baum Professor of Economics, University of Chicago Graduate School of Business and co-author of Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Nudge Richard Thaler

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler