Richard H. Thaler, Misbehaving: The Making
of Behavioral Economics
New York, NY: W.W. Norton & Company, New, 2015. xiv + 432
Published online: 14 September 2015
Springer Science+Business Media New York 2015
Misbehaving is the story of behavioral economics as a field with Richard Thaler as its
protagonist. A fitting title – describing both the human condition, and Thaler’smav-
erick academic choices – for an articulate book laying out important and contested
topics in economics.
Thaler is a master storyteller, and takes the reader on a journey of the emergence of a
new, relevant, and interesting field of economics. Behavioral economics itself is non-
sterile, and the topics picked by Thaler for inquiry are quirky, interesting, and full of
Following Pareto’s prophesy, that all laws in the social sciences will eventually be
deduced from psychology, Thaler hopes to bring more psychology into economics to
make economics more human and improving the accuracy of predictions using eco-
nomic theory (p. 9). Thaler distinguishes between the abstract Econ – the abstract homo
economicus individual used in rational choice axioms – with the more realistic Human.
He argues that economists get into trouble when they make highly specific predictions
by assuming the world is inhabited by Econs. Humans frequently violate the predic-
tions by being, well, human.
The book then takes us through the various deviations from the economic model
caused by this human-ness. He discusses endowment effects, the inability to understand
and ignore sunk costs, or to only choose on the margin, prospect theory, lack of will
power and self-control, to name a few. In each of these cases, these Humans deviate
much from Econs and throw a spanner in economists smoothly turning wheels. The
predictions are no longer true, and policies based on these economic models are defunct
at best, or worse, dangerous.
Rev Austrian Econ (2017) 30:137–141
* Shruti Rajagopalan
State University of New York, Purchase College, 735 Anderson Hill Road, Purchase, NY, USA