In ‘Misbehaving,’ an Economics Professor Isn’t Afraid to Attack His Own by Jonathan A. Knee, DealBook
The economist Richard H. Thaler has written a sly and somewhat subversive history of his profession.
Although billed as an account of the major developments in behavioral economics over the last half-century, the book is part memoir, part attack on a breed of economist who dominated the academy – particularly, the Chicago School that dominated economic theory at the University of Chicago – for the much of the latter part of the 20st century. And Professor Thaler is generally happy to name names when detailing the intellectual deficiencies and petty rivalries of his vocation.
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An academic tell-all would typically not hold much interest or even likely find a publisher. Two aspects of “Misbehaving: The Making of Behavioral Economics,” (W.W. Norton & Company) however, make it both engrossing and highly relevant.
First, economists have increasingly become the go-to experts on every manner of business and public policy issue facing society. Second, rather than being a disgruntled former employee or otherwise easily marginalized whistle-blower, Mr. Thaler recently took the reins as president of the American Economic Association (and still teaches at Chicago’s graduate business program, the Booth School of Business).
The economics profession that Mr. Thaler entered in the early 1970s was deeply invested in proving that it was more than a mere social science. But economic outcomes are the result of human decision-making. To achieve the same mathematical precision of hard sciences, economists made a radically simplifying assumption that people are “optimizers” whose behavior is as predictable as the speed of physical body falling through space.
Early in his career, Professor Thaler created a list of observed behaviors that were obviously inconsistent with the predictions of established orthodoxy. These found names like “the endowment effect,” which leads individuals to systematically value things they already own much more than the identical item in someone else’s hands.
“Misbehaving” charts Mr. Thaler’s journey to document these anomalies in the face of economists’ increasingly desperate, and sometimes comical, efforts to deny their existence or relevance. Mr. Thaler’s work built on the groundbreaking insights of the psychologists Amos Tversky and Daniel Kahneman, whose work would earn a Nobel Memorial Prize in Economic Science in 2002.
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Misbehaving: The Making of Behavioral Economics – Description
Get ready to change the way you think about economics.
Richard H. Thaler has spent his career studying the radical notion that the central agents in the economy are humans?predictable, error-prone individuals. Misbehaving: The Making of Behavioral Economics is his arresting, frequently hilarious account of the struggle to bring an academic discipline back down to earth?and change the way we think about economics, ourselves, and our world.
Traditional economics assumes rational actors. Early in his research, Thaler realized these Spock-like automatons were nothing like real people. Whether buying a clock radio, selling basketball 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. More importantly, our misbehavior has serious consequences. 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 behavior, Thaler enlightens readers about how to make smarter decisions in an increasingly mystifying world. He reveals how behavioral economic analysis opens up new ways to look at everything from household finance to assigning faculty offices in a new building, to TV game shows, the NFL draft, and businesses like Uber.
Laced with antic stories of Thaler’s spirited battles with the bastions of traditional economic thinking, Misbehaving: The Making of Behavioral Economics is a singular look into profound human foibles. When economics meets psychology, the implications for individuals, managers, and policy makers are both profound and entertaining.
Misbehaving: The Making of Behavioral Economics – Review
“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 Misbehaving: The Making of Behavioral Economics.” (Daniel Kahneman, winner of the Nobel Prize in Economics and author of Thinking, Fast and Slow)
“Misbehaving: The Making of Behavioral Economics gives us 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: The Making of Behavioral Economics. 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)
“I would like everyone in business to buy Misbehaving: The Making of Behavioral Economics and claim half the cost on expenses. The book is so enjoyable, it would be improper to claim more.” (Rory Sutherland, vice-chairman, Ogilvy & Mather UK)
“Richard Thaler not only founded behavioral economics, he’s also a great storyteller and observational comic. Have a seat, pour some good wine, and listen as the founder of a field narrates the fight to force economists to acknowledge the human brain.” (Chip Heath, Stanford University, co-author of Made to Stick, Switch, and Decisive)
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.
Misbehaving: The Making of Behavioral Economics by Richard H. Thaler