Book Of The Week: 'Misbehaving' By Richard H Thaler

The author's latest goes deep inside behavioural economics

Behavioural economics is the trendy branch of economics, in as much as that's not an oxymoronic thing to say. It's the once-renegade part of the field that posits that all those beautiful theories about how markets behave, how wealth is dispersed and how consumers choose, have just one teeny-tiny issue that means they're not as perfect as they could be. (Anyone who wishes to defend them might wish to cast their minds back to the financial events of 2007–'08.) And that issue? Well, we're it.

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Richard H Thaler, now a professor at the University of Chicago Graduate School of Business and the co-author of 2008's Nudge: Improving Decisions About Health, Wealth and Happiness, was one of the first people to pipe up. He had a hunch that people don't quite behave how economists would like: that we don't always recognise what's in our best interests, and we don't always do what, to a Spock-like economist, makes obvious sense.

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His new book, Misbehaving: The Making of Behavioural Economics, is partly a history of the field, which began in the Seventies (though Thaler argues both Adam Smith and John Maynard Keynes were hip to it long before, even if no one really paid attention to those bits) and has taken serious hold in the last decade. The Obama government has a team dedicated to it, and Thaler also advised David Cameron's bods on how to get people to pay their taxes (cheers, Rich).

But Thaler is the opposite of a stuffy old don. Misbehaving is full of anecdotes and examples of how behavioural economics came to be, and features tidbits on everything from how to make better draft picks in the NFL to the most sensible strategies for Deal or No Deal. The findings of Thaler and his colleagues can't be packaged into a pleasing formula because it's the messy stuff of real life, but his book makes a compelling case that when it comes to thinking about economics, we really should put ourselves into the equation.

Misbehaving: The Making of Behaviour Economics is out on 7 May (Allen Lane)

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