I am Professor of Experimental Economics at the University of Auckland where my work lies at the interface of economics and psychology. In a discipline (and a world) that tends to emphasize human self-interest, I have always been interested in our willingness to engage in unselfish behavior. Incentivized decision-making experiments with human participants where payments depend on the nature of their decisions are a powerful way of analyzing behavior. Are people willing to put their money where their mouth is? My background running experiments made me well-positioned to study some of these questions; a lot of them in collaboration with other social scientists including psychologists and political scientists.
To a large extent, the research agenda that is subsumed under the rubric of “behavioral economics” started with the idea of bounded rationality and the departures from the utility maximizing model of economics.
Many of the ideas pursued in this line of work owe their origin to the work of Herbert Simon, whose doctorate was in political science from Chicago in 1943 but who was awarded the Nobel Prize in Economics in 1978 for combining ideas from mathematics, psychology, economics, and computer science to understand decision making in large organizations. This is not to suggest that none of this was known before.
In fact, some people consider Adam Smith to be the first behavioral economist for his work The Theory of Moral Sentiments, which incorporates ideas from David Hume that it is passion (or emotions) that drive human behavior rather than deliberative reasoning. But, by and large, Simon’s work provided…
In this fourth edition of his ground-breaking work, Herbert A. Simon applies his pioneering theory of human choice and administrative decision-making to concrete organizational problems. To commemorate the fiftieth anniversary of the book's original publication, Professor Simon enhances his timeless observations on the human decision-making process with commentaries examining new facets of organizational behavior. Investigating the impact of changing social values and modem technology on the operation of organizations, the new ideas featured in this revised edition update a book that has become a worldwide classic. Named by Public Administration Review as "Book of the Half Century," Administrative Behavior is…
I’ve been working in value-based pricing for over 20 years and I’ve seen firsthand how it can transform a company’s profits when done right and executed properly through sales. While the specific strategies and tactics vary across industries, company size, and product offerings, many of the foundations and logic behind those strategies can be learned, and must be understood in order to grow a company’s revenue and profit growth in today’s markets. I’d love to connect about any of these topics – feel free to reach out on LinkedIn!
This book takes a deeper look into the psychology of choices and pricing.
It helps provide more context and understanding around some familiar tactics and what drives buyer’s decisions. While price setting can be a technical activity, leaders need to understand the softer/behavioral skills to sell that price both internally and externally. Both components are important in order to get your pricing right.
Winner, 2022 Leonard L. Berry Marketing Book Award, American Marketing Association
How do leaders, managers, and proprietors go about the essential task of setting prices? What biases enter into this process, and why? How can a business debias its price setting to become more productive, strategic, and profitable?
Combining perceptive insights from behavioral economics with leading-edge ideas on price management, this book offers a new approach to pricing. Gerald Smith demonstrates why understanding, reframing, and refining everyday pricing processes-a firm's or manager's pricing orientation-results in a better long-term pricing strategy. He explores how pricing actually happens in practice and shows…
I have followed the debate over the efficacy of the rational man model that underpins the theories of economics (so-called homo economicus) closely. Is, as many psychologists have claimed, homo economicus dead? Or does homo economicus still have a pulse and need to be revived? I like the way Lionel Page bravely tackles this debate.
Although he is not blind to the shortcomings of the rational man model, he illustrates that there are good reasons for the departures from it that have been identified over the past two to three decades. Far from trying to put another nail in the homo economicus coffin, Page suggests that it can be refined to make its prognostications more valid.
I recommend this book to anyone interested in the study of human behaviour.
For a long time, economists have assumed that we were cold, self-centred, rational decision makers - so-called Homo economicus; the last few decades have shattered this view. The world we live in and the situations we face are of course rich and complex, revealing puzzling aspects of our behaviour. Optimally Irrational argues that our improved understanding of human behaviour shows that apparent 'biases' are good solutions to practical problems - that many of the 'flaws' identified by behavioural economics are actually adaptive solutions. Page delivers an ambitious overview of the literature in behavioural economics and, through the exposition of these…
Anyone who has ever studied economics really only got part of, and a biased part of, the story.
I enjoyed reading about the pioneering work Richard Thaler, and other early behavioral economists did on how human minds actually work in the real world and not just in economic theory.
Learning about specific use cases and specific examples of the work Thaler created has made me think differently about economics, investing, and trading. In a lot of ways, it has been a complete game-changer for me. It really blew my mind.
Nobel laureate Richard H. Thaler has spent his career studying the radical notion that the central agents in the economy are humans-predictable, error-prone individuals. Misbehaving is his arresting, frequently hilarious account of the struggle to bring an academic discipline back down to earth-and change the way we think about economics, ourselves, and our world.
Traditional economics assumes rational actors. Early in his research, Thaler realized these Spock-like automatons were nothing like real people. Whether buying a clock radio, selling basketball tickets, or applying for a mortgage, we all succumb to biases and make decisions that deviate from the standards of…
When I became a minimalist, I found that having less made my household chores so much easier. Before then, I thought I was a loser who lets dirty dishes and laundry pile up. But when my environment changed, what I had believed was my personality also shifted. Once my apartment was tidy, it became a habit to do the dishes right away and vacuum the floor before going out, and my life became consistently enjoyable. But other habits were harder nuts to crack, like quitting drinking or exercising regularly. In Hello, Habits I write about my journey of acquiring these habits through a process of trial and error.
Hyperbolic discounting is a term used in behavioral economics to describe our tendency to overvalue immediate gratification while undervaluing future rewards. When asked to choose between getting (A) one apple a year from now or (B) two apples a year and a day from now, people pick (B). However, if the choice is between getting (A) one apple today or (B) two apples tomorrow, people find (A) more attractive. Why is it so difficult to acquire good habits, like going to bed early or getting important work done, instead of playing with our smartphone? The idea of hyperbolic discounting offers a brilliant explanation, shedding light on the troublesome natures we humans possess. Although that’s not the main focus of this book, it’s still an excellent, easy-to-read introduction to behavioral economics.
Could you lose weight if you put $20,000 at risk? Would you finally set up your billing software if it meant that your favorite charity would earn a new contribution? If you’ve ever tried to meet a goal and came up short, the problem may not have been that the goal was too difficult or that you lacked the discipline to succeed. From giving up cigarettes to increasing your productivity at work, you may simply have neglected to give yourself the proper incentives.
In Carrot and Sticks, Ian Ayres, the New York Times bestselling author of Super Crunchers, applies the…
As an avid reader, I have been fascinated by children’s reading development and began researching this topic with a specific interest in the personal motivation of young readers. I examined children’s reading in various digital formats, including e-books made by families and children themselves. Today, I work as Professor in Norway and the UK and enjoy working across academia and industry. I feel very passionate about communicating research in an accessible way to children’s teachers, caregivers, and policy-makers. The books on my list do this exceptionally well, and I hope you will enjoy them as much as I did.
Tap, Click, Read was one of the first books to describe reading with screens in a balanced and measured way. I liked that the authors engaged with a range of research studies and outlined the significant potential of digital books for children’s literacy development, particularly if the books are designed with research principles in mind. The book inspired me to write in jargon-free language when communicating research to non-academic audiences. I loved the many examples in the book illustrating how young children tap, click and indeed read with modern interactive screens.
A guide to promoting literacy in the digital age With young children gaining access to a dizzying array of games, videos, and other digital media, will they ever learn to read? The answer is yes if they are surrounded by adults who know how to help and if they are introduced to media designed to promote literacy, instead of undermining it. Tap, Click, Read gives educators and parents the tools and information they need to help children grow into strong, passionate readers who are skilled at using media and technology of all kinds print, digital, and everything in between. In…
What grabbed my attention was a section comparing homo economicus with Homer Simpson, rational economic thinking versus the impulsive American comedic icon.
Most economics is based on individuals
exercising rational decision-making to achieve maximum personal utility, be
this in terms of financial or psychic income.
Their collective response allows
statements to be made about aggregated economic behaviour. Such a view is being
challenged by behavioural economists who integrate lessons from psychology with
the 'laws' of economics.
They believe behaviour is not always driven by a
conscious cost-benefit approach but can be influenced by emotional and cultural
factors, which can lead to decisions which contradict economic theory, are
irrational and inconsistent, and may not be in the individual's best interests.
The second edition of Behavioral Economics: The Basics summarizes behavioral economics, which uses insights from the social sciences, especially psychology, to explain real-world economic behavior. Behavioral economic insights are routinely used not only to understand the choices people make but also to influence them, whether the aim is to enable citizens to lead healthier and wealthier lives, or to turn browsers into buyers.
Revised and updated throughout with fresh current-event examples, Behavioral Economics: The Basics provides a rigorous yet accessible overview of the field that attempts to uncover the psychological processes which mediate all the economic judgements and decisions we…
When I first started covering Wall Street as a reporter, I faced a steep learning curve. I had always loved history, but I knew almost nothing about the history of Wall Street itself. I started educating myself -- and what began as a utilitarian effort to do my job better became a life-changing passion. Too often, financial history gets written for analysts and academics; it was a rare joy to find writers who told these wonderful Wall Street tales in an engaging, accessible way. That became my goal as an author: to write financial history in a way that could fascinate the general reader.
Perhaps no academic theory has had a more pernicious impact on how we understand and regulate the markets than the “rational market hypothesis” – the theory that “markets know best” and work best if left alone. Justin Fox explains the rise, the rule, and the ruin of this powerful but fundamentally flawed idea in a remarkably engaging way. A delight to read!
Chronicling the rise and fall of the efficient market theory and the century-long making of the modern financial industry, Justin Fox's "The Myth of the Rational Market" is as much an intellectual whodunit as a cultural history of the perils and possibilities of risk. The book brings to life the people and ideas that forged modern finance and investing, from the formative days of Wall Street through the Great Depression and into the financial calamity of today. It's a tale that features professors who made and lost fortunes, battled fiercely over ideas, beat the house in blackjack, wrote bestselling books,…
This is a great book to get your priorities in life clear and proactively plan your life to get the most out of it. Considering that our activities in life are highly dependent on resources such as time, money, and health, this book is a great tool to live your life without regrets. The earlier in life you read it, the better!
Imagine if by the time you died, you did everything you were told to. You worked hard, saved your money, and looked forward to financial freedom when you retired.
The only thing you wasted along the way was... your life.
Die with Zero presents a startling new and provocative philosophy as well as practical guide on how to get the most out of your money - and out of your life. It's intended for those who place lifelong memorable experiences far ahead of simply making and accumulating money for one's so-called Golden Years.
I’ve long been fascinated by money and wealth and people’s relationship to them. I started my career as an estate planning attorney and then broadened my expertise to investing. I know that investing can seem scary due to the complexity of the financial markets and the overwhelming amount of investment products and strategies. But successful investing doesn’t have to be hard or scary. With the proper guidance, anyone can embark on a strategy of creating wealth through investing. Reading the right book is a good first step in the right direction.
Practicing good behavior is the most important ingredient of successful investing.
And understanding the ingrained biases and heuristics that negatively impact our behavior is essential to good investment behavior.
I’ve read dozens of books on behavioral biases, and I think this book is among the best and a perfect introduction to the topic. Written in a light and humorous manner, Montier explains common cognitive biases, how they lead to irrational investment decisions, strategies for overcoming them, and how to practice better investment behavior.
A detailed guide to overcoming the most frequently encountered psychological pitfalls of investing
Bias, emotion, and overconfidence are just three of the many behavioral traits that can lead investors to lose money or achieve lower returns. Behavioral finance, which recognizes that there is a psychological element to all investor decision-making, can help you overcome this obstacle.
In The Little Book of Behavioral Investing, expert James Montier takes you through some of the most important behavioral challenges faced by investors. Montier reveals the most common psychological barriers, clearly showing how emotion, overconfidence, and a multitude of other behavioral traits, can affect…
