misbehaving the making of behavioral economics by richard thaler

You want a very accessible look into the human mind – you don’t need an economics or psychology degree to enjoy the book. These are useful tools to have when approaching investment management. Thaler explains why losses are twice as painful as gains, and how to use “mental accounting” tricks to motivate behavior. This book has helped to shine a light on biases that are inherent in how I (and others) make decisions – from how I handle investment losses, save for the long term, or even make decisions about shoes. How will this book change my habits or influence me? I was struck by the tenacity and courage it took for Professor Thaler to work against the prevailing paradigm at the time – it took decades for his ideas to become mainstream, but ultimately led to a Nobel Prize. There are a lot of interesting and often humorous anecdotes throughout the book about the odd decisions humans make. They also impact our decisions in a wide swath of other activities – gambling, law school, politics, and even the NFL Draft.

Human biases affect how we invest, save, and go about financial planning. I was struck by the range of applications to which these concepts could apply. This blend of psychology and economics was eventually called Behavioral Economics, and this book is the story of his journey creating this new field. He calls this “misbehaving” – acting in a way that is counter to what “should” be done. Thaler, borrowing from and collaborating with prominent experts in psychology, challenged this notion and showed that humans not only often make irrational decisions – they do so in a systematic and predictable way.

The study of economics, up until Richard Thaler and some others came on the scene, revolved around the assumption that humans fundamentally make rational decisions. Thaler pioneered this field of study, so I was eager to learn more from his book. Through him, I was exposed to some of Nobel Prize-winning professor Richard Thaler’s work on Behavioral Economics.

In grad school, my investments professor specialized in market irrationality. Since my first psychology course in college, I’ve always been fascinated by how people make the decisions they do – particularly when they are illogical or irrational. Thaler Reflection by: Jonathan McAdams, CFA® Misbehaving: The Making of Behavioral Economics By: Richard H.

Misbehaving the making of behavioral economics by richard thaler