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A review by sam1972
Misbehaving: The Making of Behavioral Economics by Richard H. Thaler
2.0
Annoyingly passive-agressive and salty about not being taken seriously enough by economists. Mostly a repeat of other books in behavioral economics like Thinking Fast and Slow and Nudge.
The framing of people as irrational for things like loss aversion seems a little silly. Much of behavioral economics is done this way: the researcher imagines what a 'rational' action would be and then goes on to see if people do that, and, surprise surprise, they often don't. Yet that's a very low bar to clear. Hardly anyone that wasn't inculcated into the economists' rationalist framework assumes people act that way all the time.
This may be because they've accepted the classical economics definition of 'rational', where people are self-interested utility maximizers who always use the best possible strategy. But in reality, it may be more rational not to try to calculate explicit probabilities and utilities given the cost of aquiring information (even just the calorie cost of mental computation). A person with only limited access to a very slow computer, for example, might do better to use an approximate algorithm rather than the more precise one. There are multiple different strategies that may be their own kind of rational. Nor is it clear that we can call a person irrational if nobody could have predicted the outcome observed.
The book gives lots of examples of where people behave 'irrationality' according to that narrow conception. But its not clear whether these are cherry-picked, or representative of the majority of the ways people behave. What % of people's behavior is irrational? What % is rational? The author acknowledges that people aren't entirely rational or irrational, but doesn't seem to give much effort to providing a reliable estimate of which is more true of people. Given how many examples there are attempting to promote irrationality, it seems like the author believes humans are irrational 99% of the time, which seems a little extreme.
The framing of people as irrational for things like loss aversion seems a little silly. Much of behavioral economics is done this way: the researcher imagines what a 'rational' action would be and then goes on to see if people do that, and, surprise surprise, they often don't. Yet that's a very low bar to clear. Hardly anyone that wasn't inculcated into the economists' rationalist framework assumes people act that way all the time.
This may be because they've accepted the classical economics definition of 'rational', where people are self-interested utility maximizers who always use the best possible strategy. But in reality, it may be more rational not to try to calculate explicit probabilities and utilities given the cost of aquiring information (even just the calorie cost of mental computation). A person with only limited access to a very slow computer, for example, might do better to use an approximate algorithm rather than the more precise one. There are multiple different strategies that may be their own kind of rational. Nor is it clear that we can call a person irrational if nobody could have predicted the outcome observed.
The book gives lots of examples of where people behave 'irrationality' according to that narrow conception. But its not clear whether these are cherry-picked, or representative of the majority of the ways people behave. What % of people's behavior is irrational? What % is rational? The author acknowledges that people aren't entirely rational or irrational, but doesn't seem to give much effort to providing a reliable estimate of which is more true of people. Given how many examples there are attempting to promote irrationality, it seems like the author believes humans are irrational 99% of the time, which seems a little extreme.