Nobel economics winner Richard Thaler says make research about the world, not the literature
I first heard about Richard Thaler in the 1980s, in a locker room at the University of Chicago. I had run into Steve Shavell, an economist at Harvard Law School, who asked me what I was working on. I mumbled some question I had, about whether people really behaved as rationally as economists said they did. Shavell responded without a lot of enthusiasm: "Oh, you should be reading Thaler, that guy from Cornell." That afternoon, I looked up Thaler’s work. It was like a burst of sunlight, or the first chord of the Beatles’ A Hard Day’s Night. Focusing on what he called "mental illusions", Thaler explained that human beings made a lot of blunders. With clear examples, a sense of play and a little maths, he showed that people just did not act in the way predicted by standard economic theory. If you give people a mug or a lottery ticket, they will demand a lot more to give it up than they would pay to get it in the first place. People are planners as well as doers, and their decisions can ...
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