Thursday, January 7, 2016

Misbehaving

Behavioural economics, where not everyone is presumed to be rational at all times, has gone mainstream. This is no doubt thanks to the fact that every esteemed behavioural economist seems to have at least one popular book out. While I wasn't expecting much different from one of the latest, Richard Thaler's Misbehaving, I was actually pleasantly surprised.

I did recognize a lot of the material Thaler covered (e.g. from books by Kahneman, Ariely, Cialdini etc), but he made it interesting enough to keep me engaged. I also think it's such an important topic/field that a refresher is never a bad idea.

There were also some ways of looking at things that I hadn't fully previously grasped. For example, I still put a lot of stock in rational models, assuming that a lot of user "error" cancels itself out. I probably overestimated how much gets canceled out however, as systematic errors probably result in results where a lot of times things don't get canceled out at all, but instead get pushed to extremes.

I highly recommend the book to anyone with even a passing interest in economics.

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