Misbehaving

Along with “Thinking Fast and Slow”, this is “the” book to read with respect to the behavioural economics movement. Thaler takes the reader on a thorough history of the subject, and how his academic/professional career contributed to the field.

Thaler likes to remind the reader that he wasn’t destined for great things in the more traditional mathematical fields of modern economics, but instead found his path in debunking the consensus that economic agents were rationally, perfectly informed optimisers (i.e. what he calls “econs”). Surely, who wouldn’t agree with that? But it really is quite shocking how many economists are fooled by the lunacy of their assumptions, and how many, in light of robust evidence, fail to see that they are just wrong.

Thaler plays great respect to Danny and Amos, and how they inspired him to undertake his journey and how together they were able to bring these findings into the mainstream.

I particularly enjoyed the “Finance” section of the book, given that this is also my main area of interest. It was fun to read Thaler’s ongoing battle with Fama (from the efficient market’s hypothesis, EMH) and the rest of the Chicago school during his tenure. His brief literature review on his work debunking EMH (2 parts: the price is right and you can’t beat the market) was also great stuff.

Overall, I would highly recommend this book.

For a longer discussion of the book, I would also recommend watching his talk at Google.

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