From The New Republic:
As a young economics professor in the late 1970s, Richard Thaler began noticing small but nagging ways in which ordinary people defied the predictions of economic theory. A friend confided that he mowed his lawn to save $10, but winced at the suggestion that he mow someone else's to make $10. A colleague confessed that he'd never go out and buy a $50 bottle of wine for a family meal, but that he'd recently opened up a $50 bottle at dinner because it happened to be lying around. The textbooks assumed people would behave identically when equal amounts of money were at stake. But here they were doing completely different things depending on the context.
By the late '80s, Thaler had begun recording these observations in a column for a leading academic journal. The column laid the groundwork for a book, called The Winner's Curse, published in 1994. And the book widely signaled the arrival of a previously obscure sub-field known as behavioral economics. Behaviorists like Thaler believed that the perfectly rational, utterly selfinterested maximizers of economists' imaginations had little in common with actual human beings, who frequently err when making simple calculations, who have trouble with self-control, who often act out of altruism or spite....MORE
Hat Tip Double Play: Mankiw to Cowen to CI.
(we score it as a 5-4-3)
