Misbehaving: The Making of Behavioral Economics - Richard Thaler

Finishing this book was a race against time to get it back to the library, but I made it. And I'm so glad I got to soak up even the last pages. This book took a long time for me to read because the concepts were mostly new and I took notes throughout. 

A few months ago I read The Undoing Project by Michael Lewis  (you can read that review here) and his discussion of Prospect Theory as first explained by genius psychologist Amos Tversky and his partner, Nobel laureate Danny Kahneman. This book exploded in my brain. It awakened a curiosity for behavioral economics and decision making I didn't even know was there. It spoke to concepts I grapple with daily in my work adjusting and reserving claims and I simply had to know more. 

I suppose I've always been a curious person. I really enjoy the act of learning. I've spent fully 22 years of my life in formal classroom settings. But having a full time job and trying to love and nurture two tiny humans can sometimes leave little room for exploration and discovery into new interests. So between The Undoing Project and Misbehaving, my curiosity is born anew and I'll be starting a new certification program in January, largely in response to the way my mind has reacted to these books. And to me, that's probably the very best thing about books and their power.

Richard Thaler took a risky approach to economics. In Misbehaving: The Making of Behavioral Economics, Thaler details his humble behavioral beginnings in economics when a list on a blackboard kept taking him back to things that were unexplained in current economic theory, things that broke the rules, things that didn't make sense. Thaler stumbled upon Kahneman and Tversky's work and sought them out, finding kindred spirits. Their collaborations are briefly touched upon in The Undoing Project. And from there Thaler forged ahead, gathering like minds to explore the incongruities of human behavior and economic theory - the misbehaving. (You may have caught Richard Thaler's brief appearance in the movie The Big Short based on the Michael Lewis book where he appears next to Selena Gomez in a casino - review here).

He made enemies. He made friends. He made an entirely new field of study within economics. And our world is better for it. We are not all economists. We are not all rational beings. Instead we often act irrationally. Become incomprehensibly attached to objects through ownership. Coming to value what we have far above the true value of the item. Econs don't do this. But humans do. And to understand the economic and market system in which we live, we must take these things into account. Doing so gives us a much better descriptive model from which to work and predict. 

Thaler does a great job making these theories accessible. I'm not making the mistake of believing I now could practice or completely understand the field of Behavioral Economics, but I do understand the broad brushes and my life is just plain better for having read this book.

5/5 Stars.