Big Think Interview With Richard Thaler | Big Think
Big Think Interview With Richard Thaler
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A conversation with the author and behavioral finance theorist.
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RICHARD THALER:
Richard H. Thaler is an American economist. He is perhaps best known as a theorist in behavioral finance, and for his collaboration with Daniel Kahneman and others in further defining that field.
He currently teaches at the University of Chicago Booth School of Business, and is an associate at the National Bureau of Economic Research, and has organized a series of behavioral finance seminars along with Robert Shiller, another behavioral finance expert at the Yale School of Management. Previously he taught at Cornell University and the MIT Sloan School of Management
Thaler has written a number of books intended for a lay reader on the subject of behavioral finance, including "Quasi-rational Economics" and "The Winner's Curse," the latter of which contains many of his Anomalies columns revised and adapted for a popular audience.
Most recently Thaler is coauthor, with Cass R. Sunstein, of "Nudge: Improving Decisions About Health, Wealth, and Happiness" (Yale University Press, 2008).
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TRANSCRIPT:
Question: What is a “nudge”?
Richard Thaler: Let me give you an illustration of a nudge. It’s funny, it’s one paragraph in our book, but it’s by far the most famous example from the book. It turns out some genius who, an economist in fact, allegedly at least, an economist who works for the Amsterdam International Airport Schipol, got the brilliant idea to etch the image of a housefly in the urinals in the men’s bathrooms at the airport. This image of a housefly, it looks extremely realistic. You can see a picture of it on our website nudges.org. It’s located just near the drain. It turns out, that men, when they’re taking care of their business, they’re not fully attending to the task at hand, but, I’m sure there’s an evolutionary explanation for this, if you give them a target, they will aim. According to the people who run the airport, spillage has been reduced by 80%. That housefly has become my favorite illustration of a nudge.
So, what’s a nudge? A nudge is some small feature of the environment that attracts our attention and alters our behavior.
Question: What is the difference between a nudge and a push?
Richard Thaler: It comes down to values. When should we nudge and when should we shove, I think, it’s a political judgment. Obviously in some situations we need shoves, we need laws. Fraud is against the law, murder is against the law, drunk-driving is against the law. We don’t need just nudges.
On the other hand, sometimes we can combine the two. So for example, in some states if you’ve been convicted of DWI, Driving While Intoxicated, after you serve your sentence and you get your license back, you also have to equip your car with some device that requires you to pass some sobriety test before you turn the car on. I think that’s probably a good rule. So we can push the two but. Where we’re going to go on various public policy issues will be a political decision, where of course, people will differ.
Question: How can we identify and allocate risk better?
Richard Thaler: I think the people who’ve been the most overconfident in our business in the last decade have been the people that called themselves risk managers. And the reason is they failed to learned the primary lesson we should have learned from when Long Term Capital Management went belly up ten years ago. That is, investments that seem uncorrelated can be correlated simply because we’re interested in it.
LTCM lost money when Russia defaulted on a certain class of bonds, and then they had other investments like on the spread between two different kinds of shares of Royal Dutch Shell Oil Company. Now that seems completely unrelated to Russian bonds. But they were related because other hedge funds saw similar discrepancies and they were all making similar bets.
So the world is much more correlated than we give credit to. And so we see more of what Nassim Taleb calls “black swan events”-- rare events happen more often than they should because the world is more correlated.
I think one lesson we have to learn is that there’s a lot more risk than we’re giving credit to, a lot more what economist calls systematic risk...
Read the full transcript at bigthink.com/videos/big-think...
Пікірлер: 36
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If only we had more "well-intentioned" capitalism. How much better could our capitalistic system be on our psychological well being.
@shadabfariduddin6784
6 жыл бұрын
It is an impossibility: WIC
Liked his comments and observations in the movie, 'The Big Short.' Explained a lot. The comments and the movie.
If I may suggest that you put the questions in audio form in some way, that'd be great. A lot of people like to just listen to videos and not being able to hear the questions makes it unlistenable. Thank you.
This guy is so inspiring. A great mind, indeed
@Sakhmeov
8 жыл бұрын
+System D Yah, and what he says about "skin in the game" is entirely right. But in the interest of having fundamentally correct incentivization, is that really all there's to be said? I'm just about convinced that there should be no such thing as banks as separate companies. Seriously. I mean, when the business and the product are both money, what do you get? Banks have only administrative and locale expenditures, and can only strengthen their market position by piling up more cash. More cash means more investment basis, so you can make more bonds and lend more money, and get an even bigger piece of the market. You do this, and keep tiding it back and forth, and that's how you make money off banking. Well, how do you strengthen your position, without having to wait so damn long to build up capital? You can cut wages or expenditures immediately, or make the trading communication more efficient, but... those are both money-saving and not immediately effective efforts, and they're difficult and come with their own host of problems. No, it's much better if you can just "create" money in one big go, so you can get off the starting block real quick. How? Well, you overvalue some stuff, you write more bonds than you have securitization for, you use some loophole in law or lack of policy overwatch to make quick money off a risky business which you consider yourself dissociated from and which you can then put to work immediately even though it isn't backed by any actual productivity, and then if you can overinsure this money so you get even more returns once it "disappears"... Ring any bells? This guy was in a movie recently? I seriously think that it's not enough to make it so that you can't short bonds for more than their present value plus accrued premiums. I think we need to make it impossible for banks to exist as separate business ventures. That we need to make it so that only corporations who are in production or service and who hold real assets and contracts, and governments who are willing to make bonds of portions of the actual government and its estate, will be allowed to act as banks.
@Homunculas
2 жыл бұрын
He's a modern day Goebbels.
Good Job professor
Congratulations, professor!
it's very nice thought
@hadleybarton1940
6 жыл бұрын
Sidharth Rakshase yes thank you
In a system that were less corrupt these measures might be helpful. But currently it'd be lipstick on a pig. There are some massive reforms needed!
richard you have good idea
من الدحيح ؟ 😆
@Ahmed-hg5tk
Жыл бұрын
طلع فيه ناس يشوفون المصادر😂
If you see this video after nobel prize ,like ;)
When my boys were young, I would throw Cheerios in the toilet to help their aim. Moms have known this for years. The explanation is not evolution, it’s play
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Ok
الدحيح😂❤
It's really sad that companies are so greedy that they have no morality and respect for peoples personal lives. Instead of relying on the quality of their product, they have to use coercion to sell it. What does that say about the quality of their product. The Government is a much bigger issue. Their need for power and control reflects the status of their character and mental state. Maniacal if you as me. Normal people don't need to control everything, nor do they want it. Can you imagine being in control of everything? I have too much to do being in control of myself and my responsibilities!! That's not something I'm remotely would want.
@tuckerbugeater
6 ай бұрын
you live in a fantasy world
@Katherine-L789
6 ай бұрын
@@tuckerbugeater Do I? Think about your moronic statement?
3:26 . A jibe at Nassim Nicholas Taleb, I see.
yet few organizations copy successful nudges
Where does AI come into this
@lugovicsergej
6 жыл бұрын
in design of irrational agents
@tuckerbugeater
6 ай бұрын
lol@@lugovicsergej
I desagree because if people where more motivated to use the commom sense laws would be useless
@teaoh4485
Жыл бұрын
Common sense is a myth. IQ’s and education levels differ.
@supersugainfo7341
Жыл бұрын
@@teaoh4485 totally wrong inteligence can be learned e developed common sense is what differs a human being from an animal if someone does not have it, is dangerous to be close to that person, IQs and education levels differ thats right
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