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Misbehaving
What It’s About
We're not irrational because people are flawed, but because the theories about us are wrong. Richard Thaler reveals why we consistently make decisions against our own interests and how to design systems that nudge us in the right direction without forcing anything. You'll discover the two voices inside your head, why losing hurts twice as much as winning feels good, and how to become a better version of yourself simply by changing the environment around you.
Three Key Ideas
Loss Aversion and Reference Points
Losses hurt roughly twice as much as equivalent gains feel good, causing people to make decisions anchored to their current situation rather than actual value.
Bounded Self-Control
A planner self and a doer self compete in every decision, and the present-focused doer wins at the moment of temptation unless the option is removed in advance.
Choice Architecture and Nudging
Designing the environment so the good default is also the easy one changes behavior dramatically without banning or mandating anything.
Read a Sample
Misbehaving: Summary
The exam that started everything
Picture this. You're a university professor, and your students are furious with you. It isn't because your exam is hard. The scores are spread out exactly the way they should be: some people do well, some do less well, and the average lands somewhere in the middle. The only problem is that the average is seventy-two points out of a possible hundred. To the students, that feels like a catastrophe. Seventy-two? That's barely more than halfway, and they'd worked so hard for it.
The young professor was Richard Thaler, and what he did next would have made every one of his economist colleagues wince. He didn't make the questions on the next exam any easier, and he didn't improve anyone's grade. He changed exactly one thing: he raised the maximum possible score from a hundred to a hundred thirty-seven. The final grades still came off the same curve. The new exam even turned out a bit harder, with students getting only seventy percent of the answers right. Yet the average suddenly became ninety-six. And the result? The students were delighted, and they never complained again. Thaler even put it in bold in his syllabus: the new scoring system has no effect on the grade you get in the course, but it seems to make you happier.
That's where the real lesson is buried. Seventy-two out of a hundred and ninety-six out of a hundred thirty-seven stood for almost exactly the same performance. Common sense says the number itself is completely meaningless. Yet it changed how people felt. Thaler later called this a supposedly irrelevant factor: something that, according to classical economics, should play no role whatsoever, yet keeps tugging at our behavior again and again. This book is about how he built an entire discipline out of small, stubborn observations like that one. It's also about how he fought for it against a profession that, for decades, wouldn't even listen.
Who It’s For
- Anyone who wants to understand why smart people make predictably bad financial decisions.
- Anyone who manages a team and wants to build systems that bring out better judgment from colleagues.
- Anyone designing products, policies, or public programs and needs to account for how people actually behave.
- Anyone who saves too little, spends impulsively, or holds on to sunk costs longer than they should.
About the Author: Richard H. Thaler
Richard H. Thaler is a professor of behavioral science and economics at the University of Chicago Booth School of Business. He is one of the founders of behavioral economics, and his decades of research demonstrated that human decision-making systematically departs from the predictions of classical economic theory.
Thaler was awarded the Nobel Memorial Prize in Economic Sciences in 2017 for his contributions to behavioral economics. He is also the co-author of Nudge, written with Cass Sunstein, which brought the concept of choice architecture into public policy debates worldwide.
