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Misbehaving: The Making of Behavioural Economics Paperback – 5 May 2016
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Wildly disruptive (Michael Lewis Bloomberg)
Gripping... a novelised intellectual history, replete with heroes and villains, triumphs and disasters, conflicts and comradeship... Thaler is a brilliant scholar, endlessly curious, empirically inclined and public spirited (Guardian)
Misbehaving 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)
A long, genial, often humorous account of the progress of Behavioural Economics by one of its most gifted practitioners. Kahneman has described Thaler as lazy; he meant it as a compliment because Thaler's laziness means he concentrates only on the really important questions that get him out of bed in the morning... this is important stuff (Bryan Appleyard Sunday Times)
Robust enough intellectually to be a serious work of social science and a proper record of an important intellectual movement, Misbehaving is also fun for the general reader... a good book about an important topic (Daniel Finkelstein The Times)
Professor Thaler's entertaining book provides an important reminder of both the challenges and opportunities that come from working across the sometimes artificial boundaries between academic disciplines (Jonathan A. Knee New York Times)
From the Author
Richard H. Thaler is the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics and the director of the Center for Decision Research at the University of Chicago's Graduate School of Business. He is the author of Nudge: Improving Decisions About Health, Wealth and Happiness.See all Product description
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Specialists often get blinkered, or even blinded, by their own field's theories that they fail to see the real world. I recall a sign I once saw "That's all very well in practice but it will never work in theory!" We need to remain open to ideas that contradict our own comfortable world and be prepared to accept change. Thaler's book isn't just for economists - it's for anyone who needs to deal with real world behaviour and decision making.
Core premises of economic theory are that people choose by optimizing (rational choices) and that supply equals demand (price equilibrium). These premises assume that economic decisions are taken by a selfish and rational agent: the homo economicus, the 'Econ'. But, the models based on those premises can generate flawed results and a lot of bad predictions. Econs exist only in a fictional world, not in the real world inhabited by Humans.
The economists guild should earnestly reckon with human psychology and the social sciences. They should not exclude supposedly irrelevant factors (SIFs) in their analyses, like 'sunk costs' (money already spent) or 'loss aversion'. Other generally accepted axioms, like the precept that buying and selling prices should be about the same or that more choices are always preferred to fewer, belong to a virtual, not a real world. People have well-defined preferences and self-control problems, while professional economists are misled by theory-induced blindness.
R. H. Thaler tries to clarify the notion of 'smart' investor, and comes to the strange conclusion that a 'smart' investor is somebody who is trying to buy stocks, of which he thinks that other 'smart' investors will later decide that those stocks are worth more. He also mentions J. M. Keynes' remark that people are willing to make extreme forecasts based on flimsy data, on 'ephemeral and non-significant' day-to-day information.
The author attacks the 'efficient market hypothesis', with its two components: you can't beat the market and prices are right. But, prices are often wrong (the October 1987 crash, close-end funds) and value stocks beat the market (B. Graham). One should read this book for the overall evaluation of these hypotheses by the author.
Ultimately, the goal of the author is not to tell people what to do, but to help them achieve their own goals.
These trenchant comments ('wickonomics' - wicked for the economic profession - not 'wackonomics') are a must read for all those who don't want to live and work in the imaginary world of Econs.
N. B. Thomas Kuhn's vision on science (the consensus model and paradigm shifts) has been criticized by Karl Popper and his own vision (the conflict model and challenging hypotheses).
But as with any fine non-fiction work, its may be best to dip into and out of - as its all too much to take in, in one go.
Had to slog through and by the end wasn’t really enjoying it.
Kept it at three stars as there were some gems buried in it.
Fantastic read, bringing together BE stories from the past forty odd years. Ties together the history of BE and how it evolved to the pedigree it is today.
Delighted Thaler got his Nobie whilst I was reading.