The Making of Behavioral Economics

Description

The Making of Behavioral Economics” is the sweeping effort of Richard H. Thaler to trace the development of behavioral economics, a discipline that combines psychology with the understanding of economics to explain human decision-making. As an architect of the new field, Thaler recounts for us how traditional economic theory based on rational decisions was ever so slowly overturned by evidence that people often act irrationally.

For instance, the book traces the history of the field and when concepts like bounded rationality, loss aversion, or mental accounting originated. Thaler credits the input from his interactions with other great scholars, among them Daniel Kahneman and Amos Tversky, in the development of prospect theory—the theory that based modern behavioral economics. The narrative also gives attention to Thaler’s work: he developed the idea of nudges or small intervention actions that can change the decisions of people’s free choices.

This is the most truthful academic and personal travelogue inside how behavioral economics came to be respectable in the eyes of mainstream economists, transforming public policy, finance, and human behavior about humanity.