Are humans programmed to act in our own best interests? Traditional economics says yes, placing rational decision-making at the core of its theories, predictions and policy prescriptions. Behavioural economics disagrees, arguing that humans are unpredictable creatures, whose quirks need to be taken into account. The theoretical tussle between these two fields forms the core of the new book by the US economist Richard Thaler, who co-authored the seminal work on this topic, Nudge, in 2008.
Having dedicated his career to this hybrid of economics and psychology which analyses the economic impact of human error, Thaler takes pride in charting its rise from a disparaged sideshow into the mainstream of economic thinking (although he sounds almost wistful when admitting that his days as a “professional renegade” are behind him.) A skilled storyteller, Thaler shares amusing anecdotes about his early career and the birth of his influential friendship with the Nobel Prize-winning psychologist Daniel Kahneman and his collaborator Amos Tversky. These are enhanced by engaging explanations of how humans, lazy and lacking in discipline as we are, can avoid making costly mistakes in our personal lives, businesses and governments.
Thaler has written what will come to be regarded as the subject’s bible. Captivating and comprehensive, it narrates the battle he has fought, and largely won, to force economists to acknowledge that human beings misbehave.