Misbehaving: The Making of Behavioural Economics
By Richard Thaler
Review by Lydia (PPE)
Misbehaving: The Making of Behavioural Economics is about the growth of the field of behavioural economics from the 1970s onwards, detailing its journey from a topic 鈥渄ismissed at first by economists as an amusing sideshow鈥� to one of the fastest growing fields of economics. As someone who knew almost nothing about economics before deciding to apply for PPE, this book was both very helpful and entertaining.
Most of Thaler鈥檚 discussions begin with looking at classic economic models and then demonstrating how they fail due to the inaccurate representation of human behaviour. This allowed me both to gain some understanding of basic economic principles and assumptions, and to think critically about the methodology of economics 鈥� particularly in relation to 鈥渉omo economicus鈥�. 聽This is the assumption that human behaviour is always completely rational and selfish and Thaler refers to the imaginary people who always act in line with this as 鈥渆cons鈥�. 聽鈥淓cons鈥� don鈥檛 care about things like sunk costs (money you have already spent) or the endowment effect (valuing things you own more than things you don鈥檛) or any other number of 鈥渟upposedly irrelevant factors鈥� which affect the decisions of real people. The dozens of real life stories and experiments Thaler details demonstrate how this assumption undermines even basic supply and demand models. This creates a strong argument for the importance of 鈥渢he field鈥� to understanding economics and an explanation for its recent explosion in popularity.
Described as 鈥渨hen economics meets psychology鈥�, Thaler does not presume any prior economic knowledge and smoothly intertwines the story of behavioural economics as a field and the key problems it attempts to address with a good deal of humour and entertaining tales. I found the book useful also in demonstrating how wide the field is 鈥� spanning maths to sociology to politics to psychology and countless other topics. I found this really encouraging and it really made me excited to begin exploring what else economics has to offer.
Misbehaving: The Making of Behavioural Economics by Richard Thaler
ISBN-10: 0241951224
ISBN-13: 978-0241951224
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