When I was in college, I hated my economics coursework. I was working full time in increasingly challenging positions while I got my degree and I loved the ability to apply what I studied at night the very next day. That worked pretty well for almost everything but economics.
In my economics textbooks, people were always rational and very disciplined. They always had all the information they needed and they always sought to maximize economic value.
That sure wasn’t me and it didn’t represent the people I worked with. We were emotional beings, who were only rational and disciplined some of the time. We never had all the information we needed to make important decisions, and we often made choices based on things that had nothing to do with money.
Then along came “Behavioral Economics,” which I like to think of as economics as if real people mattered. Things labelled “economics” started to make sense for me. I read several things by Richard Thaler and I liked his reasoning and his style so I snapped up Misbehaving: The Making of Behavioral Economics.
The book was a joy to read and packed with insights, large and small. I love the distinction Thaler makes between “Econs” and “Humans.” “Econs” are those hyper-rational, fully informed beings who populate economic textbooks. Humans are the rest of us.
The book is strewn with insights and I loved that. Here’s a favorite. I always heard that people make better decisions when the stakes are higher. They may be more cautious, but Thaler pointed out something that I had never really considered. It’s on and around page 50.
Thaler points out that we make lots of small stakes decisions, so we get good at them. But we make very few high stakes decisions, like buying a home or choosing a career. Because we rarely make those decisions, we don’t get good at them. Whew! Makes sense to me. That’s why being able to pick a good advisor is important when you’re making big decisions.
Misbehaving is a good overview of the history and development of behavioral economics viewed through the prism of Thaler’s career. That was fine with me, but I think you’ll be able to figure whether to buy this book if you think of the subtitle as “The Making of a Behavioral Economist,” that economist being one Richard Thaler.
If the biographical plot is fine for you, you’ll learn a lot. There are discussions of methods of analysis and economics terminology that I was not aware of. Thaler describes research well and in words that make things clear to a non-expert, like me.
Here’s the bottom line. If you’re interested in the development of behavioral economics, you want a lucid description of key insights, and you don’t mind viewing that development through the lens of Thaler’s career, this is a great book. It’s a good read and you’ll learn a lot.
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