11/2/2017
Episode was about the origin of behavioral economics. Summed up succinctly by the creator of the field (Richard Thaler), who won a Nobel Prize: traditional economics can be boiled down to two words “people optimize.” Thaler’s response that summarizes behavioral economics: “no they don’t”
The idea is that people do not act rationally in line with traditional economic expectations. Example, take months to save money but when tax refund comes in people view it as free money and spend it irrationally.
Behavioral economics gave rise to this notion of “Nudge units”—that if you set up systems by default, people tend to stay in. For example, many companies set up Nudge units for 401k contributions. That is, when you start a job, you’re automatically set up to contribute a certain salary percentage to your 401k amount vs not having the default and having people actively sign up. When these default Nudge units are set up, people stay in them.
So on a micro scale, set up your own Nudge units to optimize returns on time and money.
Book Summaries. Less than 272 words. 