Misbehaving The Making of Behavioral Economics ePUB Ú

Misbehaving The Making of Behavioral Economics ePUB Ú



10 thoughts on “Misbehaving The Making of Behavioral Economics

  1. Athan Tolis Athan Tolis says:

    He’s taken his time and he’s waited his turn but Richard Thaler has delivered the definitive book on Behavioral Economics the one you can’t afford to miss It’s a summary of the main findings a history of how they came about and a preview of coming attractions with due care taken to pay tribute to those who came before Thaler and apportion credit to those who worked with himThe field is not as new as Thaler would have you think There’s bias in this account and it is a bias against those among his predecessors who tried to explain human behavior in a way that was consistent with mainstream economic theory I’m thinking Gary Becker here who tried to explain long lines outside empty clubs and packed cheap restaurants alike using an “upward sloping demand curve” and famously sat down to write a paper on suicide when his wife took her own life; I’m thinking the very same Robert Barro that Thaler makes fun of when he describes him as the smartest man ever but who nonetheless made me understand in his book “Getting it Right” why superstars could get paid so much in a zero sum game and got confirmation to his theory when Maradona got paid than the rest of his team Napoli put together and justifiably so because he not only took them to the Campionato but also deprived much fancied teams from winning itThaler’s predecessors operated in a world where most Economics books had to start with a chapter explaining why Economics is a science Of course they had to stick to the utility maximizing profit maximizing orthodoxy Besides orthodox economic theory was not all that shabby when it came to predicting human behaviorBy the time Thaler was entering his prime Economics no longer had to apologize to anybody and was much open to heresy of course It was in a position to withstand additional uestioning Armed with a nice piece of math invented by Tversky and Kahneman it was ready to be taken to the next levelThaler takes you through the whole thing in the space of the shortest 358 pages you will ever read As he promises at the start he tells it through a bunch of stories mostly the stories of his collaborations and his epic fights with Economic OrthodoxyThe book is worth reading for the humor alone The jokes range from pure slapstick example p 128 “we were trying to learn what ordinary citizens albeit Canadians think is fair” to the esoteric inside joke like when he mentions Vishny is a common co author of Shleifer to the best of my knowledge he’s never written a paper without Shleifer If you’re not laughing the whole time basically there are suadrons of jokes flying over your head My favorite type of humor relentless repetition is also very well represented I lost count of the number of times I read the expression “invisible handwave” The man is irrepressible basically You can’t keep him downThere’s a sadness that goes with this too and it’s that this is a bit of a category killer “Misbehaving” Pareto dominates all behavioral economics books that precede it in terms of readability context scope you name it I don’t know what I would do with myself if I was Dan Ariely or if I was Steven Levitt Roe v Wade findings notwithstanding to say nothing of Tim Hartford They now have to accept that there’s a book out there that beats their entire life’s work on all frontsThe long problem set masuerading as a re interpretation of behavioral economics that is Kahneman’s “Thinking Fast and Slow” is the only true exception to the rule it continues to stand alone but relative to “Misbehaving” it’s a cop out As he told Michael Lewis in the interview that preceded that book Kahnemann did not want to write the history of the field he did not want the book to have the feel of one’s last book So the door was left wide open to Kahneman’s self admittedly “lazy” student to jump into the breachThis he has done with gustoProspect Theory how we are risk averse when we’re winning and risk loving when we’re losing is taught straight from Tversky and Kahneman’s 1976 graph and is used to explain i transaction utility including Costco’s business model ii sunk costs ie why you will carry on wearing an uncomfortable pair of shoes you paid 300 dollars for iii the endowment effect including later in the book how it undermines the Coase theorem and iv “gambling with the house’s money” at the casino versus the fact that outsiders get overpriced toward the end of the day at the racetrack Bucketing of budgets gets thrown in for freeNext comes a tutorial on Self Control Thaler explains that many humans discount future pleasure or pain on a scale that is totally unrelated to how we present value bond cashflows and mainly operates on three levels Now intense Later much less intense and Much Later only slightly less intense than Later This leads to preferences that are intertemporally inconsistent a nightmare to Economic Orthodoxy but very often true in real life Heady stuff and I promise he makes it clear He does not use graphs or charts or math He explains it all with one picture the famous cover of New Yorker magazine where everything this side of the Hudson is rendered in great detail New Jersey through to California takes up as much space as West Manhattan and Asia is visible behind You get that chart you get how we humans really think about delayed gratification GeniusA chapter follows which is a summary of “Thinking Fast and Slow” but without trying to shoehorn the rest of Behavioral Economics into that modelThe next couple chapters deal with Fairness the Ultimatum Game the Dictator Game the Punishment Game cooperation games such as the Prisoner’s Dilemma and a revisit of the Endowment Effect as exemplified by the trading of Mugs with capital M Then Thaler attacks Finance and the Efficient Market Hypothesis in ParticularNot that anybody sane thinks markets are efficient but you could tear out the rest of the book and keep pages 203 to 253 as a uick guide to why markets are inefficient Thaler starts with Keynes’ “beauty contest” analogy for stock picking we pick the girl we think most other people will like not the one we really fancy Next he explains why a stock ought to be worth the net present value of its dividends and takes the reader through Shiller’s discovery that stocks move around tons than dividends do or can be reasonably expected to do which proves they wander around tons relative to what they will ever pay out He offers additional proof by going through closed end funds’ variation from their NPV and gets some serious kicks from pointing out that stocks on occasion sell for less than the market value of their listed subsidiaries He’s a bit of a showman Thaler he calls this “negative stock prices”From there he goes for the kill and notes that Royal Dutch Shell shares have a different price in New York versus Europe and never so than they did during the blow up of LTCM providing a real life example of Shleifer and Vishny’s mathematical formalization of Keynes’ old aphorism that “the market can stay irrational for longer than you can stay solvent”At some point Chicago had to follow Al Pacino’s view that “you keep your friends close and your enemies closer” and put him on the faculty From his angle it was time to storm the citadel and this is what Thaler chronicles nextHe had been ready for them from day one The book actually starts with “The Gauntlet” which is the series of challenges orthodox economists lay out for the behavioral crowd1 The “As If” challenge states that even if nobody is an expert in everything society operates as if we all were because through division of labor we all end up doing things we understand2 The “Incentives” challenge states that people respond to incentives once the stakes are large enough All the wishy washy behavioral stuff washes away once we’re talking real money3 The “Learning” challenge states that even if we get it wrong in “one shot” games in real life most games are “repeated” and behavior thus converges to what Orthodox Economics would suggest4 The “Invisible Hand” argument states that if we all go about doing what’s best for us we nevertheless end up doing what’s right for everyone else as wellWon’t spoil it for you and take you through Thaler’s answers to the above It’s after all what the book is really all about But forgive me one indulgence I’ve GOT to tell you about the bit where he demolishes Robert BarroThe Rational Expectations Hypothesis has a number of implications chief amongst them the prediction that fiscal stimulus does not work If the government writes you a check the story goes you know you’ll be taxed for it in the future so you save it rather than spend it And the stimulus ends up being a damp suib Thaler proves the circularity of this argument by suggesting a similarly circular counter argument what if the rational agents that compose this economy believed in Keynes’ multiplier? What if they thought the stimulus will work and the economy will fly and their taxes will actually go down? Should they spend TWICE the check they were sent?From Chicago he goes on to a couple well earned victory laps He applies Behavioral Economics to Americal Football where he advised three separate teams on how to conduct their affairs during the annual draft to game shows he was allowed to set up with Endemol where he proved that his theories can withstand some pretty high stakes and from there onto “nudging” people to contribute to their pension and pay their taxes on timeHe ends the book with a wish that one day there will be one Economics again with the Orthodox Economics of utility maximization and profit maximization as a uaint special case We’re probably already there


  2. Muriel Muriel says:

    What is the value of 'Misbehaving' after 'Nudge' and 'Thinking Fast and Slow'? After all 'Thinking' told us the discovery process by behavior science demigod 'Nudge' explained how to apply behavior science to practical policy making 'Misbehaving' has its value independent from 'Nudge' and 'Thinking' Uniue in 'Misbehaving' is a candid account of the struggle getting recognized when your opinions are different from the establishment a humble understanding on the fortunate events that helped a young investigator to start and stand in the field 'Misbehaving' tells the reader many 'insider baseball' stories how Thaler got skinned at conferences journal submissions but the tone wasn't vengeful and how he got back to his feet and respond with empirical evidence rather than ideological tautology 'Nudge' and 'Thinking' read like champions writing home from the finishing line or the celebratory after party while 'Misbehaving' is Thaler's account of 'life as a professional renegade' This is part of the appeal don't we all like a good underdog story? Most of us are at best underdogs in our fields Thaler's humble 'renegade getting recognized' story is fuzzily encouraging In this way 'Misbehaving' reads like a grand parent writes to the grand children sharing the stories of life and perhaps planting a vague idea that 'fight on' could be fun 'Misbehaving' writing reminds me of Richard Feynman's books in being funny irreverent and honest In the Conclusion chapter Thaler likened his now mainstream status to 'The lunatics are running the asylum' You won't find exclamations like this in either 'Nudge' or 'Thinking' It reminds me of Feynman on his safe cracking or thoughts of 'cargo cult science' Thaler comments on a general practice in academia As usual after such meetings both sides were confident that they had won Thaler saved some directness for his intellectual opponents there is no sugar coating on what he thought of them least scientific Yes it is a little easier to be direct and unapologetic after you have turned mainstream and your collaborators have won the Nobel but the book is direct and honest about himself too Like this Thaler recounts how his thesis advisor assessed him 'We did not expect much of him' Enjoy


  3. Caroline Caroline says:

    Thaler was one of the people who brought behavioural economics into being and this book covers the story of his journey He says that classic economics describes man as a logical creature and bases its theories upon this idealised figure In behavioural economics on the other hand humans do a lot of misbehavingHerewith some odd nuggets and asides I picked from the book view spoiler Economics is considered the most intellectually powerful of the social sciences this is because it has a unified core theory from which nearly everything else follows In fact economists often compare their field to physicsLosses of what we already have hurt us substantially than new gains satisfy us It gives us some pleasure to gain something but it distresses us far to lose somethingChanges are the way that human beings experience life; eg if you move from your office to a meeting room and the temperature is the same you won't give the issue of temperature a second thought You will only notice if the meeting room is unusually hot or cold in relation to the rest of the building When we have adapted to our environment we tend to ignore it Instead we notice changes They can be changes from the status uo or changes from what was expectedbut whatever form they take it's changes that make us happy or miserable We learn via freuent practice and immediate feedback We are therefore much likely to learn in relation to the trivia in our lives eg what sort of type of bread we like than in relation to the really big stuff eg what sort of house to buy or wife to choose Learning takes practice and often we don't get practice with the big stuffHuman beings love a bargain Shops that have tried to do away with coupons or round up prices to a realistic figure eg 400 rather than 399 or do away with fake 'special offers' have often had to change back to these practices The customers want the bargains or at least an impression of bargains or sales plummetThe one alternative to the above are retailers like Walmart and Costco where the retailers successfully operate under an everyday low pricing strategy They have convinced customers that their entire shopping experience is an orgy of bargain huntingSunk costsThis is when an amount of money has been spent and the money cannot be retrieved eg Joyce bought three dresses for her six year old daughter Cindy to wear to school but Cindy decided she wouldn't go to school if forced to wear dresses In this instance Joyce has to let go of the money she spent on the dresses but she finds it very difficult to do this We all do Phrases like Don't cry over spilt milk or Cut your losses and move on are another way of taking advice to ignore sunk costs Many believe that the US continued its futile war in Vietnam because they had invested too much to uit Lotteries are a very good way of getting people to take part in something eg if you want people to take part in a survey offer the prize of a nice bottle of wine or whateverPeople hate it when a company appears to be acting greedily eg Uber practices surge pricing whereby prices fluctuate depending upon levels of demand Sometimes there is a big difference between low and peak demand as much as ten times the regular price There have been a lot of complaints from clients about this practice Experimental games have also shown that people put much money into a game if they are able to punish freeloaders We are uite obsessed with fairness in all aspects of lifeWe like keeping the status uo We often find change difficult CollaborationAlthough there are a handful of psychologists who have formed successful collaborations with economists over the years behavioural economics has turned out to be primarily a field in which economists read the work of psychologists and then go about the business doing research independently In neuroscience there is slightly collaboration Not all interdisciplinary meetings are a waste of time but in the author's experience they have been disappointingManagers are often risk averse This is because in most companies creating a large gain for the company will lead to modest rewardswhile creating an eual sized loss will get you fired Companies need to create environments that are benign so that managers will feel comfortable taking risks hide spoiler


  4. Melora Melora says:

    First book I've returned to Audible and Audible makes that astonishingly easy not that I expect to need to do it often but my gosh just a click and they send me back my money impressive As my three star rating indicates this is not a Bad book at all I listened to it for a little less than three hours I think and the bits about behavioral economics were really fun I enjoyed Thaler's stories about the irrational financial choices people make which he presents in contrast with the ideal logical choices which traditional economists assume people will act on Unfortunately the book is not about behavioral economics but rather as the title clearly indicates about the Making of the field The author was evidently a central figure in the development of this branch of economics and the greater part of the book as far as I got in it is about his career and efforts to bring other economists to see things from his point of view He spends a lot of time talking about other economists and their specialties and interests giving credit to those who contributed to his developing ideas He talks about how he got jobs at various universities who he worked with the papers they wrote the walks they took etc Which might possibly be of interest to me if I knew enough about economics to recognize and be impressed by all the significant figures he mentions But I don't So Not bad just too specialized or outside my areas of interest


  5. David David says:

    This book is by Richard Thaler one of the founders of the field of behavioral economics When he first started getting into this field he faced mountainous obstacles mostly from his fellow economists For many years he collaborated with Daniel Kahneman and Amos Tversky who are famous for the book Thinking Fast and Slow In 2017 Thaler received the Nobel Prize in economics for his work in understanding the realities of economic decision makingThis book is enjoyable and engaging and is packed with interesting anecdotes Perhaps he goes a little overboard in describing his personal story and his interactions with Kahneman and Tversky; there is a little bit too much of this and it almost feels like name dropping The book is mostly about the development and history of behavioral economics rather than the subject of behavioral economics itself On the other hand I also very much enjoyed reading one of his previous books Nudge Improving Decisions About Health Wealth and Happiness


  6. Huyen Chip Huyen Chip says:

    For someone without any background in economics before this book is an eye opener It gives me many tools that I'm sure I can effectively use to argue with my friends in the future It's also an easy read Richard has many interesting stories to tell each with many lessons to learn from


  7. Vincent Li Vincent Li says:

    I have mixed feelings about this book I wrote a brief article about how college doesn't teach you anything and to my horror I realized that I already learned most of what this book has to say For someone without any background in behavioral economics I recommend reading this in conjunction with Thinking Fast and Slow the two books will pretty much teach you everything you need to know Having studied most of the points mentioned in the book as well as reading several of the papers summarized I enjoyed the book mainly for the anecdotes and fun tidbits for example that the exponential discount function was first posited by the great Samuelson The book was interesting to me in that it also served as a memoir for Thaler discussing the various phases of his academic life and his work I was pleasantly surprised to confirm that Thaler's collection of anomalies was a nod to Kuhn's theory of scientific revolutions I also heavily agreed with Thaler's emphasis on randomized trials and use of experimental evidence over a priori axioms Now for the critiue Thaler seems like a bit of a braggart He never seems to cease name dropping and some of his claims seem overreaching He makes it seem almost like he single handedly set up behavioral economics Additionally the characterization of economists of the rational mold seem unfair to me Posner and Miller are reduced to stubborn silly one dimensional characters when both are accomplished and nuanced Thaler sets up certain classical problems such as the dividend puzzle the euity premium puzzle and close ended funds and proclaims them solved by behavioral economics I read the dividend puzzle paper and while the solution seems reasonable it has little to no empirical work ironic given Thaler's admonishment that mainstream economics doesn't look at evidence enough Thaler claims to have solved the euity premium puzzle by looking at loss aversion rather than risk aversion and argues that additionally the euity premium puzzle cannot be a risk premium because he looked at the betas of the euity and it didn't explain the euity premium However especially after Fama's work there's widespread agreement that beta does not completely capture risk it's hard to get a beta of the market Thaler himself recognizes this when he discusses the Fama French factors and the failure of CAPM It seems disingenuous to try to refute a possible objection using a risk metric that he knows is not accurate Lastly Thaler criticizes Miller for dismissing his work on finding a correlation between close ended funds and small cap euity It seems like Miller is correct in that just because Thaler found a correlation he shouldn't be able to attribute that correlation to investor sentiment In other words Thaler presents as fact what is still very controversial in the fieldEven during my studies I always found myself annoyed by Thaler's idea of mental accounting For the record I find the concept of mental accounting totally reasonable and perhaps even true However scientifically speaking it does not seem falsifiable Any result that does not jive seems to be able to be explained away and it seems like mental accounting has little to no predictive power At least to me Thaler needs to propose some empirical tests that can differentiate between behavioral explanation and other explanations Otherwise his explanations are as axiomatic as the mainstream economics he criticizes


  8. Charles Berteau Charles Berteau says:

    It was once a cliche that economics theory dealt only with completely rational human beings under the principle that this was the only way to develop workable models Even though classical economists from Smith to Keynes had acknowledged that human behavior often deviated from the rational the models persisted in this foundation I guess the theory was that deviations from the rationale would be okay because human behavior would vary in random ways and the rational average would still holdThat this ridiculous assumption has been largely set aside is due to the work of a few remarkable people such as Daniel Kahnemann see Thinking Fast and Slow Robert Shiller of Case Shiller Home Price Index fame Amos Tversky and others including Richard Thaler author of this book and previously Nudge These economists and psychologists bridged the wide gap between these disciplines and created behavioral economics demonstrating that in the real world humans tend to exhibit the same non rational behavior over and over again The assumpion that Humans behave like Econs is simply wrong and demonstrably so in real experimentationThaler provides a history of behavioral economics his role and that of the other giants It's a fascinating walk through the creation of a discipline and a peek into the world of academia which can be incredibly vain and pettyThroughout Thaler blends fascinating if now familiar stories about human irrationalities the Supposedly Irrelevant Factors across finance fairness and many other topics I especially enjoyed the case study of how the Chicago School of Economics allocated new offices even though the faculty of this school are all strong rationalists who would rationally auction off kidneys to the highest bidder they didn't allocate their offices that way at all but rather by seniority and lottery What is good for the goose is not always good for the ganderIf the topic interests you at all it's a great great read Thaler is an engaging funny author and he makes difficult topics easy to read Check it out


  9. Steve Steve says:

    Yup this is now officially the memoirautobiography of the 2017 Nobel Prize Winner This was a lot of fun but it is what it is It's a career academic writing about his professional journey basically the story of the evolution of his successful productive and arguably paradigm shifting lifetime of research for a popular audience in the context of the intersection of economics and well everything related to behavior which of course includes a healthy dose of psychology The book holds together nicely but what makes the book a joy are the examples anecdotes and results from empirical research The topics run the gamut from retirement savings to household insulation to corporate leadership to the NFL draft to taxation to the bowls of nuts on the table to for me the most entertaining the selection of faculty offices in an elite graduate schoolIf you haven't studied or read or thought much about economics I have no idea how accessible this would be but it wouldn't surprise me if it would be interesting and thought provoking for anyone willing to read and uestion their preconceived notions and thinkThere's a lot of life inside the ivory tower stuff that I'm guessing plenty of readers will find lies somewhere between inside baseball and too much information and geeks tell all drama but at least for me I found it hugely entertainingIt was fun reading this soon after enjoying Rodrik's Economics Rules and I'm guessing anyone that enjoys one will enjoy the otherSide note I haven't yet read Nudge Thaler's well known collaboration with Cass Sunstein but I'll probably go back and read it at some point At least based on my experience this book stands up just fine on its own


  10. Don-E Merson Don-E Merson says:

    This was a really fun read It gives kind of a behind the scenes look at how the field came about from one of the most prominent creators of the field


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Misbehaving The Making of Behavioral Economics ❰PDF / Epub❯ ☀ Misbehaving The Making of Behavioral Economics Author Richard H. Thaler – Centrumpowypadkowe.co.uk Nobel laureate Richard H Thaler has spent his career studying the radical notion that the central agents in the economy are humans—predictable error prone individuals Misbehaving is his arresting fr Making of MOBI ☆ Nobel laureate Richard H Thaler has spent his career studying the radical notion that the central agents in the economy are humans—predictable error prone individuals Misbehaving is his arresting freuently Misbehaving The Epub / hilarious account of the struggle to bring an academic discipline back down to earth—and change the way we think about economics ourselves and our worldTraditional economics assumes rational actors Early in The Making of eBook ¸ his research Thaler realized these Spock like automatons were nothing like real people Whether buying a clock radio selling basketball tickets or applying for a mortgage we all succumb to biases and make decisions that deviate from the standards of rationality assumed by economists In other words we misbehave More importantly our misbehavior has serious conseuences Dismissed at first by economists as an amusing sideshow the study of human miscalculations and their effects on markets now drives efforts to make better decisions in our lives our businesses and our governmentsCoupling recent discoveries in human psychology with a practical understanding of incentives and market behavior Thaler enlightens readers about how to make smarter decisions in an increasingly mystifying world He reveals how behavioral economic analysis opens up new ways to look at everything from household finance to assigning faculty offices in a new building to TV game shows the NFL draft and businesses like UberLaced with antic stories of Thaler’s spirited battles with the bastions of traditional economic thinking Misbehaving is a singular look into profound human foibles When economics meets psychology the implications for individuals managers and policy makers are both profound and entertaining.