Misbehaving: The Making of Behavioral Economics by Richard Thaler

Behavioral economics is a field of study that has revolutionized the way economists, researchers and policy makers think about and act upon economic decision making. Richard Thaler, a Nobel Prize winning economist, is one of the preeminent thinkers in this field, and his latest seminal book, “Misbehaving: The Making of Behavioral Economics”, is the culmination of decades of thought on the topic. The book is structured around the central theme of how people’s decisions deviate from the assumption of rational behavior and the implications of this for economic analysis.

The term “behavioral economics” first appeared in the late 1970s, with the work ofDaniel Kahneman and Amos Tversky. Thaler himself was part of the same movement and initially wrote on the topic in the late 1970s and early 1980s, but Misbehaving is the first book to lay out a comprehensive view of the field.

In the book, Thaler outlines the various situations that cause humans to deviate from rational economic decision-making, from preferring the status quo to multiple successes and failures leading to irrational patterns of behavior. He uses historical and current empirical data to illustrate his arguments, including examples from his own research. He also talks about psychological and behavioral factors which influence decisions.

The second part of the book is devoted to demonstrating how behavioral economics can be applied in real life. Thaler stresses that we are neither rational nor irrational, but a mix of both. He maintains that understanding the ways in which people fail to maximize their utility can be used to improve economic efficiency and policy.

In the final part of the book, Thaler extends the concept of behavioral economics to discuss public policy matters. He considers areas where behavioral economic thinking can be applied, such as healthcare, environmental, and education policies. He offers advice on how these policies can be improved by taking into account people’s tendencies to make decisions that are not purely rational.

Overall, “Misbehaving: The Making of Behavioral Economics” is an informative and engaging book. Thaler has managed to build a comprehensive overview of the field, offering both empirical evidence and clear examples of how it can be applied in everyday life. It serves as a introduction to the field and is essential reading for anyone interested in understanding why people behave in the ways that they do, and how this relates to economic models and public policy.