The Economics Show What economics gets wrong about human behaviour, with Richard Thaler
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Nov 7, 2025 
Richard Thaler, a Nobel Prize-winning behavioural economist and professor at the University of Chicago, challenges the traditional view of humans as rational decision-makers. He discusses why people often act against their best interests, highlighting concepts like sunk costs and the ultimatum game as examples of human irrationality. Thaler also explores the impact of nudging in pensions and critiques failed policies like presumed-consent organ donation. His insights reveal the complexities of human behaviour that traditional economics often overlooks.
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Limits Of Homo Economicus
- Economics' Homo economicus model is a useful simplification but often fails to predict real human behaviour.
- Textbooks teach the model, but real people are messier and exhibit systematic deviations like sunk-cost bias.
Concert Tickets And Sunk Costs
- Thaler explains sunk costs with the concert-ticket example: people go because they paid for tickets.
- Real behaviour shows payment affects decisions even when it shouldn't by rational theory.
Ultimatum Game Reveals Fairness
- The ultimatum game contradicts the narrow rational prediction that responders accept any positive offer.
- Most people split roughly half and reject offers under ~20%, showing fairness preferences and punishment motives.
