Your
people, whom you brought up out of the land of Egypt, have corrupted
themselves;
they have
turned aside quickly out of the way which I commanded them. Exodus 34:7-8
Last
week, the University of Chicago’s Richard Thaler was awarded the Nobel Prize in
economics. Thaler will go down in
history as the man who slew homo
economicus.
If
it’s been awhile since Econ.101, you might not remember that homo economicus was that mysterious
creature that sprung fully formed from the brain of classical economists: the
person who made all his decisions based on careful calculation and enlightened
self-interest. Homo economicus would plan carefully for retirement by setting
aside savings early to benefit from compound interest. If the price of gasoline dropped, he would
use the discount in other areas of life instead of buying more expensive
gasoline. He will value his own possessions accurately and sell them if there
is an opportunity for gains.
Richard
Thaler suspected that many people were not quite so logical. So he started asking them, conducting
studies. What he found is that people
are predictably irrational about their economic decisions. They make different choices when they are
afraid, or when they have developed attachments. They maintain habits even when they are
destructive. They spring for the quick pleasure and ignore the long term need.
Human
beings are not as strong, wise or noble as economists had expected they were.
