Human Behavior

Why do we make the choices we make, even if they may seem irrational to an outsider watching us make them? What defines irrational behavior?  Can the choices we make be radically changed just by the smallest tweaks in how information is presented to us? These questions all fall under the field of economics known as Behavioral Economics, which takes normal economic theory, and actually applies it to humans. The so called father of behavioral economics is Dr. Richard Thaler. Thaler’s works, most notably Nudge: Improving Decisions About Health, Wealth, and Happiness and Misbehaving: The Making of Behavioral Economics are absolutely fantastic at explaining one of the newest fields of economics. I personally would recommend that you read both, starting with Nudge, and then moving on to Misbehaving. One of his most compelling arguments is that what most of us study in our economics classes is not 100 percent accurate to what actually happens in the real world. He separates the world into 2 types of people, “econs” and humans. Then he explains that these two types respond to choice theory differently. Choice theory is how we are presented with information.”econs” think how an economist would think, and the effects of choice theory has little to no effect on them, whereas it has an astronomical effect on real people.  Thaler explains exactly why this is and how we can use this knowledge to create better, more realistic economic models. I can tell you from personal experience that these two books have radically changed the way I view the world and make decision. I truly believe that if you take the time to read Thaler’s work, you will improve your own ability to make decisions on everything from what you want to eat for dinner to how you wish to invest and save for your retirement.


Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s