the making of behavioral economics and a behavioral economist

misbehaving audioA REVIEW OF RICHARD THALER’S MISBEHAVING: THE MAKING OF BEHAVIORAL ECONOMICS

There have been many books written recently on behavioral economics: Ariely’s Predictably Irrational and The Upside of Irrationality, Mullainathan and Shafir’s Scarcity: The New Science of Having Less and How It Defines Our Lives, Akerlof and Shiller’s Phishing for Phools: The Economics of Manipulation and Deception, Thaler and Sunstein’s Nudge: Improving Decisions About Health, Wealth, and Happiness, etc.

Each of these books demonstrates how people behave irrationally, in contrast to traditional economic thinking, and then discusses either public policies or personal policies that we can use — as Thaler puts it in this book — “to help people achieve their own goals,” whether that’s to save more, procrastinate less, or get out of poverty. I’ve read or listened to several of them.

This book is different and wonderfully refreshing. Thaler has been at the center of much of the development of behavioral economics, and this is a memoir of the field as he has observed and experienced it. It’s full of sharp wit and insightful, entertaining anecdotes, reporting on Thaler’s academic adventures as well as his application of behavioral economics in business consulting, for everyone from ski resorts to car manufacturers.

Because it’s a memoir, areas of behavioral economics that Thaler has touched less get less attention, such as the development of behavioral economics in international development work. That’s fine; you can read the World Bank’s Mind, Society, and Behavior or Mullainathan & Shafir’s Scarcity if that’s exclusively what you’re after.

I thoroughly enjoyed the unabridged audiobook and recommend it.

Here are a few lines that I noted, first on content:
  • On discussions with psychologist Danny Kahneman: “One aspect of these mutual training sessions involved understanding how members of the other profession think, and what it takes to convince them of some finding.”
  • “For those who are at least living comfortably, negative transaction utility can prevent our consuming special experiences that will provide a lifetime of happy memories, and the amount by which the item was overpriced will long be forgotten.”
  • “Interdisciplinary meetings, especially those with high-level agendas (reduce poverty, solve climate change) tend to be disappointing, even when the attendees are luminaries, because academics don’t like to talk about research in the abstract — they want to see actual scientific results.”
  • “As my Chicago colleague Linda Ginzel always tells her students: ‘If you don’t write it down, it doesn’t exist.'” (In other words, collect data in tangible form.)

And then a few pithy observations:

  • “To this day, Orley [Ashenfelter] insists on calling what I do ‘wackonomics,’ a term he finds hysterically funny.”
  • “At some point people reach an age at which they can no longer be considered ‘promising.’ I think it is about the time they turn forty.”
  • “‘Dumb stuff people do’ is not a satisfactory title for an academic paper.”
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