Book review
Misbehaving by Richard Thaler- a book review
A brief book review on the book Misbehaving by Richard Thaler.
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Misbehaving, the making of Behaviouraleconomics by Richard H. Thaler
Review by Maia Jafar
The basis of Richard Thaler’s book is that economics should stop looking at
economic theory to predict human behaviour and should instead study human’s
and their irrationality to create new and reinterpret economic theories. As said in
the book, classical economic theory looks at humans as robots, ‘humoids’, instead
we should be looking at people for what they are irrationally human.
Thaler used many of his and his friend’s personal experiences like driving further
to save $10 on a cheaper product but not a more expensive product. A key
takeaway was people’s perception of value is more important than the price-
biases and emotions play a big role in human’s decisions. He figured this through
his friend having an expensive bottle of wine and drinking it but refusing to sell it
or buy it. Another key takeaway was that people are very averse to loss- the fear
of losing money is much higher than that of gaining money. He found this out
through surveys which while typically are not used as a basis of classical
economic theory, he emphasizes the usefulness of them throughout the book.
Furthermore, he talks about how traditional economic theory is wrong by saying
that even if people are irrational, markets will reward those who act rationally.
Thaler argues how sometimes success happens because of luck rather than
always making the best, mist rational choices. Additionally, one of the lesser
important things mentioned in the book but one that is interesting is that in
classical economic theory, more choices are better, and people benefit from them
but Thaler states that sometimes having less choices can make people happier
which ends with them benefiting more.
How does it relate to your A-level course?
In the A-level course, behavioural economics is briefly mentioned within microeconomics, but it focuses on nudges
and biases. It can be argued that misbehaving can be applied to every aspect of economics, and they are the
limitations that can be written about theories applied to questions. Humans misbehave and that is left out of most
classical economic theories so, it can be said that this can be applied to any part of the A-level course but, in
practice, this will be mainly applied to firms and individuals making choices.
Throughout the book, Thaler used his and his friend’s personal experiences to outline the theories he came up with.
This helped to illustrate real-life examples of the theory he was explaining and make it more interesting as it
allowed you to feel as though you were with him coming up with the theory and made it easier to understand. In
addition, he walked through what led him to this point and how his career developed, this helped the reader, me,
understand how different pieces of the puzzle came together to help build the field of behavioural economics.
Furthermore, throughout the book, you could feel Thaler’s passion for the subject which only helped me feel more
engaged. The actual theory itself was also very interesting and I think it could be used more and more in
developing economic theory. It was very thought-provoking to see the links between psychology and economics
that had either not been made before or been disregarded as unimportant where Thaler put those at the forefront
of his theory and therefore book.
Thaler explains the theory quite clearly with easy to
h understand examples but as the theories progress
and it becomes more technical it is more difficult to
understand so I do not feel as though I fully
understood all the points made however, I feel that
as I progress in my study of economics and re-read
the book, I will enjoy it more and fully understand
Thaler’s words.
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