Radical with Amol Rajan Irrational Humans: How Our Behaviour Shapes the Economy (Professor Richard Thaler)
Nov 6, 2025
In this discussion, Richard Thaler, a Nobel laureate in behavioural economics and author of 'Nudge,' explores how human behavior defies traditional economic theories. Dive into concepts like loss aversion and the endowment effect, revealing why we often make irrational decisions. Thaler shares insights on youth unemployment, suggests how to redesign welfare to encourage employment, and addresses government debt through AI efficiency. He also highlights the dangers of social media's influence on our choices and perceptions.
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Economics' Flawed Rational Agent
- Standard economic models assume perfectly rational agents without emotions or self-control problems.
- Richard Thaler argues real humans routinely deviate from that ideal, making economics based on perfect agents flawed.
Use Smart Defaults With Easy Opt-Outs
- Use defaults to steer better choices, for instance auto-enrolment dramatically increases pension saving.
- Ensure opting out remains easy so people retain freedom while benefiting from better defaults.
Private Sector Outruns Policy Makers
- Private firms quickly adopt behavioural tactics, sometimes exploitatively, while governments lag in usage.
- Thaler notes tech companies run constant experiments and apply social norms and defaults at scale for profit.
