The Winner's Curse, by Richard Thaler

The Winner's Curse, by Richard Thaler

Thaler's stuff on behvioral economics has been increasingly interesting to me. There was a cool profile of him a few years back in the NYT Magazine, and maybe that turned me on to him. Simultaenously, I was getting interested in the "irrationality debate" in psychology.

You see, people and philosophers think that people (and philosophers) are rational. We assume this sort of thing all the time: you know, people make decisions about what they really want. In elementary economics, one considers many of the defining criteria for rationality rather directly: if you like hamburgers better than hot dogs, and hot dogs better than steak, then we should know you like hamburgers better than steak.

The irrationality debate in psychology is in principle the deep, deep problem. It blows away foundational assumptions not only in economics but in philosophy and moral theory, political and game theory, concepts of sociality and government, etc. Daniel Kahnemann and Amos Tversky are the two principal figures in this arena; they were named last year for the Nobel Prize in Economics. So their impact has been big.

It made me wonder if maybe Thaler had been left out. Anyway, I got around to reading one of his book.

He considers a long list of anomalous findings with respect to the theoretical predictions of economics. I don't want to comment too extensively; I'll just list what I think are the cool results.

[I'll do that in a bit.]