Quotes from Richard H. Thaler

Many people have made money selling magic potions and Ponzi schemes, but few have gotten rich selling the advice, "Don't buy that stuff.

Unrealistic optimism is a pervasive feature of human life; it characterizes most people in most social categories. When they overestimate their personal immunity from harm, people may fail to take sensible preventive steps. If people are running risks because of unrealistic optimism, they might be able to benefit from a nudge. In fact, we have already mentioned one possibility: if people are reminded of a bad event, they may not continue to be so optimistic.

Loss aversion helps produce inertia, meaning a strong desire to stick with your current holdings.

Giving up the opportunity to sell something does not hurt as much as taking the money out of your wallet to pay for it. Opportunity costs are vague and abstract when compared to handing over actual cash.

discovery starts with anomalies.

We don't have to stop inventing abstract models that describe the behavior of imaginary Econs. We do, however, have to stop assuming that those models are accurate descriptions of behavior, and stop basing policy decisions on such flawed analyses.

In economics (and in ordinary life), a basic principle is that you can never be made worse off by having more options, because you can always turn them down. Before Thaler removed the nuts the group had the choice of whether to eat the nuts or not—now they didn't. In the land of Econs, it is against the law to be happy about this!

You know, at some point people reach an age at which they can no longer be considered 'promising.' I think it is about the time they turn forty.

It is time to stop making excuses. We need an enriched approach to doing economic research, one that acknowledges the existence and relevance of Humans.

Recall that people like to do what most people think it is right to do; recall too that people like to do what most people actually do.

We are also greatly influenced by consumption norms within the relevant group. A light eater eats much more in a group of heavy eaters. A heavy eater will show more restraint in a light-eating group. The group average thus exerts a significant influence. But there are gender differences as well. Women often eat less on dates; men tend to eat a lot more, apparently with the belief that women are impressed by a lot of manly eating. (Note to men: they aren't.) So

A slightly longer answer is that people will need nudges for decisions that are difficult and rare, for which they do not get prompt feedback, and when they have trouble translating aspects of the situation into terms that they can easily understand. In

Markowitz's strategy can be viewed as one example of what might be called the diversification heuristic. "When in doubt, diversify.

make an active decision

Because learning takes practice, we are more likely to get things right at small stakes than at large stakes. This means critics have to decide which argument they want to apply. If learning is crucial, then as the stakes go up, decision-making quality is likely to go down.

Real people have trouble with long division if they don't have a calculator, sometimes forget their spouse's birthday, and have a hangover on New Year's Day.

Roughly speaking, losses hurt about twice as much as gains make you feel good. This

This reflects a general tendency. People are more willing to lie by omission than commission. If I am selling you a used car, I do not feel obligated to mention that the car is burning a lot of oil, but if you ask me explicitly: "Does this car burn a lot of oil?" you are likely to wangle an admission from me that yes, there has been a small problem along those lines. To get at the truth, it helps to ask specific questions.

a nudge is any factor that significantly alters the behavior of Humans

The evidence suggests that when people get a windfall—and this seems to be the way people think about their tax refund, despite it being expected—they tend to save a larger proportion from it than they do from regular income, especially if the windfall is sizable.

First, never underestimate the power of inertia. Second, that power can be harnessed. If private companies or public officials think that one policy produces better outcomes, they can greatly influence the outcome by choosing it as the default.

Roughly speaking, losing something makes you twice as miserable as gaining the same thing makes you happy. In more technical language, people are "loss averse.

One overly simplistic idea is that we can improve student performance by just by giving financial incentives to parents, teachers, or kids. Unfortunately, there is little evidence that such incentives are effective, but nuances matter.

our understanding of human behavior can be improved by appreciating how people systematically go wrong.