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A review by lavidaenquotes
Misbehaving: The Making of Behavioral Economics by Richard H. Thaler
4.0
Misbehaving is the story of how behavioral economics, a new and seemingly radical branch of economics, came to be. For those not too well-versed in economic theory, suffice it to say that one of its foundations is the assumption that we, humans, are rational creatures - and not just rational, but completely rational: at all times and under any and all circumstances. Quite the wild assumption, huh? Well, behavioral economics puts economic's main assumption to the test and proposes that, surprise surprise, we're not really that rational.
When I was studying economics, this assumption was quickly drilled into my brain in every class. The way I took it was: "surely we’re not completely rational, and surely we all know that much, but this is a simplification - the models are all supposed to be a simplification of life so we first learn the basics and then keep on adding on." So imagine my surprise when Thaler, one of the pioneers of behavioral economics, told of his (rather fancy and intellectual) battles against some of the most conservative economists who refused to even entertain the idea of us, mere mortals, not being as rational as the theory has been stating for ages. Little had I imagined that something that for me was crystal clear (although I didn’t know about behavioral economics by then), was considered heresy by so many big names in the field. And I’m not saying I am enlightened or anything of the sort - God knows how much I struggled - but I guess once you’re a hard-core theorist, seeing the world through a different lens can be close to impossible. Plus, there was no way I could believe myself or those around me to be that rational, to be honest. I mean, have you seen the state of the world?
Surely by now (if not by the first sentence already) I’ve lost the interest of many of you, and I get it. Economics isn’t the most thrilling of topics on any given day, and a book about how some of the theory came to be while a big chunk of what has been taught over decades had to be revised isn’t exactly a page-turner. But, believe it or not, behavioral economics can be way more interesting than your run-of-the-mill economics. Combining economics with psychology, it shows that we’re not nearly as rational as we want to believe. Ever since I read Emotional Intelligence and then Thinking, Fast and Slow, I’ve been fascinated by cognitive errors and the role that psychology, emotion, culture and social factors play when we’re making day-to-day decisions.
Unlike Thinking, Fast and Slow, Misbehaving isn’t a collection of studies, hypotheses, results and analysis. It is, as I said, an account of how behavioral economics came to be, although it does mention more than a couple of important studies or discoveries to make a point whenever necessary. To be completely honest, I picked this book up for the first time over two year ago and, since I was expecting it to be closer to Thinking, Fast and Slow than it is, I put it aside. Knowing better what to expect this time, I went in with a more open mind and ended up enjoying it immensely.
Bonus points: 1) Thaler inserts a bit of humor every now and then that I wasn’t really expecting. It’s not a laugh out loud kind of humor but this is a book about economics so you shouldn’t be expecting so much and 2) you really don’t need to be an economist (or knowing all that much about economic theory for that matter) to understand and enjoy this book (although I’m pretty sure it helps). If you enjoyed Kahneman’s Thinking, Fast and Slow, or are simply curious as to why we so often make silly decisions, then the chances of your liking this one are looking good.
“The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.”
When I was studying economics, this assumption was quickly drilled into my brain in every class. The way I took it was: "surely we’re not completely rational, and surely we all know that much, but this is a simplification - the models are all supposed to be a simplification of life so we first learn the basics and then keep on adding on." So imagine my surprise when Thaler, one of the pioneers of behavioral economics, told of his (rather fancy and intellectual) battles against some of the most conservative economists who refused to even entertain the idea of us, mere mortals, not being as rational as the theory has been stating for ages. Little had I imagined that something that for me was crystal clear (although I didn’t know about behavioral economics by then), was considered heresy by so many big names in the field. And I’m not saying I am enlightened or anything of the sort - God knows how much I struggled - but I guess once you’re a hard-core theorist, seeing the world through a different lens can be close to impossible. Plus, there was no way I could believe myself or those around me to be that rational, to be honest. I mean, have you seen the state of the world?
“What makes the bias particularly pernicious is that we all recognize this bias in others but not in ourselves.”
Surely by now (if not by the first sentence already) I’ve lost the interest of many of you, and I get it. Economics isn’t the most thrilling of topics on any given day, and a book about how some of the theory came to be while a big chunk of what has been taught over decades had to be revised isn’t exactly a page-turner. But, believe it or not, behavioral economics can be way more interesting than your run-of-the-mill economics. Combining economics with psychology, it shows that we’re not nearly as rational as we want to believe. Ever since I read Emotional Intelligence and then Thinking, Fast and Slow, I’ve been fascinated by cognitive errors and the role that psychology, emotion, culture and social factors play when we’re making day-to-day decisions.
Unlike Thinking, Fast and Slow, Misbehaving isn’t a collection of studies, hypotheses, results and analysis. It is, as I said, an account of how behavioral economics came to be, although it does mention more than a couple of important studies or discoveries to make a point whenever necessary. To be completely honest, I picked this book up for the first time over two year ago and, since I was expecting it to be closer to Thinking, Fast and Slow than it is, I put it aside. Knowing better what to expect this time, I went in with a more open mind and ended up enjoying it immensely.
Bonus points: 1) Thaler inserts a bit of humor every now and then that I wasn’t really expecting. It’s not a laugh out loud kind of humor but this is a book about economics so you shouldn’t be expecting so much and 2) you really don’t need to be an economist (or knowing all that much about economic theory for that matter) to understand and enjoy this book (although I’m pretty sure it helps). If you enjoyed Kahneman’s Thinking, Fast and Slow, or are simply curious as to why we so often make silly decisions, then the chances of your liking this one are looking good.