Carnegie Investment Counsel Blog

 

We’ve All Been "Misbehaving"

Posted by Raz Pounardjian on Apr 25, 2018 8:34:00 AM

Those of you who know me or have read some of my previous blog entries know I am a fan of behavioral finance and psychology. A couple of months ago I read Richard Thaler’s book Misbehaving, which chronicles his findings that would forever change the way we think about economic decisions. One of the basic premises of economic theory is that human beings always make rational decisions for their best interests. Thaler, along with the works of Israeli psychologists Danny Kahneman and Amos Tversky, found that while people said they would act rational, their actions proved otherwise. Their studies showed that humans are much more prone to error in their decisions and judgments than we think. 

After Thaler won the Nobel Prize for economic sciences in October of last year, he said “We’re more like Homer Simpson, than we are like Spock. In myriad ways, we do things because we’re human. We do things that are predictably different from what economists expect us to do which can help inform better economic models and better monetary policy.” Some of the most interesting highlights from Misbehaving include the following...

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Topics: Behavioral Economics, Richard Thaler

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