Nudge: Improving Decisions About Health, Wealth, and Happiness
by Richard H Thaler & Cass R Sunstein (Yale, £17.99)
To the contemporary list of endangered species one should add Homo economicus, or “economic man,” who for 200 years dazzled economics students with his feats of unbounded rationality and supreme self-control. Homo economicus is an abstraction used by economists in the classical tradition to predict human economic behaviour. He is a “rational maximiser,” in that in any given set of conditions, he will successfully pursue his own arbitrary goals to the furthest degree possible, unfettered by indecision, memory loss or lack of willpower.
The first threats to Homo economicus appeared around 20 years ago, when two psychologists, Amos Tversky and Daniel Kahneman, showed that under conditions of risk and uncertainty, people’s decision-making exhibited a number of systematic biases and irrationalities that were at odds with the predictions of classical economics. Since then, Kahneman and others have continued to churn out work (Tversky died in 1996) drawing on the findings of experimental psychology to suggest that the predictions of classical economics are at odds with real-world economic behaviour. In 2002, he was awarded the Nobel prize for economics—the first and as yet only non-economist to have been so honoured—for “having integrated insights from psychological research into economic science.”
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