Richard H. Thaler Quotes & Sayings

Unrealistic optimism is a pervasive feature of human life; it characterizes most people in most social categories. When they overestimate their personal immunity from harm, people may fail to take sensible preventive steps. If people are running risks because of unrealistic optimism, they might be able to benefit from a nudge. In fact, we have already mentioned one possibility: if people are reminded of a bad event, they may not continue to be so optimistic. — Richard H. Thaler

People think about life in terms of changes, not levels. They can be changes from the status quo or changes from what was expected, but whatever form they take, it is changes that make us happy or miserable. — Richard H. Thaler

A bat and ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost? _ cents If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets? _ minutes In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake? _ days — Richard H. Thaler

Or consider this one: people's judgments about strangers are affected by whether they are drinking iced coffee or hot coffee! Those given iced coffee are more likely to see other people as more selfish, less sociable, and, well, colder than those who are given hot coffee.27 This, too, happens quite unconsciously. — Richard H. Thaler

track, each one mile long, laid end to end (see figure 1). The tracks are nailed down at their end points but simply meet in the middle. Now, suppose it gets hot and the railroad tracks expand, each by one inch. Since they are attached to the ground at the end points, the tracks can only expand by rising like a drawbridge. Furthermore, these pieces of track are so sturdy that they retain their straight, linear shape as they go up. (This is to make the problem easier, so stop complaining about unrealistic assumptions.) Here is your problem: Consider just one side of the track. We have a right triangle with a base of one mile, a hypotenuse of one mile plus one inch. What is the altitude? In other words, by how much does the track rise above the ground? — Richard H. Thaler

We can even see the legal institution of marriage as a precommitment strategy, not unlike that of Ulysses in approaching the Sirens, in which people knowingly choose a legal status that will protect them against their own errors. — Richard H. Thaler

My hunch is that as the importance of a decision grows, the tendency to rely on quantitative analyses done by others tends to shrink. When the championship or the future of the company is on the line, managers tend to rely on their gut instincts. — Richard H. Thaler

PROBLEM 1. Assume yourself richer by $300 than you are today. You are offered a choice between A. A sure gain of $100, or [72%] B. A 50% chance to gain $200 and a 50% chance to lose $0. [28%] PROBLEM 2. Assume yourself richer by $500 than you are today. You are offered a choice between A. A sure loss of $100, or [36%] B. A 50% chance to lose $200 and a 50% chance to lose $0. — Richard H. Thaler

So, we experience life in terms of changes, we feel diminishing sensitivity to both gains and losses, and losses sting more than equivalently-sized gains feel good. — Richard H. Thaler

suppose there was some medical procedure that will provide some modest health benefit but is extremely painful. However, the procedure is administered with a drug that does not prevent the pain but instead erases all memory of the event. Would you be willing to undertake this procedure? — Richard H. Thaler

10. Calories count in New York City. The Big Apple recently adopted a law that requires fast-food restaurants with at least fifteen outlets in the city to post, in prominent places, the calories of each of their food items so that customers can make informed choices. — Richard H. Thaler

When all economists are equally open-minded and are willing to incorporate important variables in their work, even if the rational model says those variables are supposedly irrelevant, the field of behavioral economics will disappear. All economics will be as behavioral as it needs to be. And those who have been stubbornly clinging to an imaginary world that consists only of Econs will be waving a white flag, rather than an invisible hand. — Richard H. Thaler

specific values to objects. When they have to give something up, they are hurt more than they are pleased if they acquire the very same thing. — Richard H. Thaler

MBA students are not the only ones overconfident about their abilities. The "above average" effect is pervasive. Ninety percent of all drivers think they are above average behind the wheel, — Richard H. Thaler

there is no question that social pressures nudge people to accept some pretty odd conclusions - and those conclusions might well affect their behavior. — Richard H. Thaler

As I have learned over the years, and will discuss further in subsequent chapters, the reluctance to experiment, test, evaluate, and learn that I experienced at General Motors is all too common. — Richard H. Thaler

We don't have to stop inventing abstract models that describe the behavior of imaginary Econs. We do, however, have to stop assuming that those models are accurate descriptions of behavior, and stop basing policy decisions on such flawed analyses. — Richard H. Thaler

By properly deploying both incentives and nudges, we can improve our ability to improve people's lives, and help solve many of society's major problems. And we can do so while still insisting on everyone's freedom to choose. — Richard H. Thaler

The first is that seemingly small features of social situations can have massive effects on people's behavior; nudges are everywhere, even if we do not see them. Choice architecture, both good and bad, is pervasive and unavoidable, and it greatly affects our decisions. The second claim is that libertarian paternalism is not an oxymoron. Choice architects can preserve freedom of choice while also nudging people in directions that will improve their lives. — Richard H. Thaler

One overly simplistic idea is that we can improve student performance by just by giving financial incentives to parents, teachers, or kids. Unfortunately, there is little evidence that such incentives are effective, but nuances matter. — Richard H. Thaler

It is time to stop making excuses. We need an enriched approach to doing economic research, one that acknowledges the existence and relevance of Humans. — Richard H. Thaler

Our principal claim here is that patients and doctors should be free to make their own agreements about that right. If patients want to waive the right to sue, they should be allowed to do exactly that. This increase in freedom is likely to help doctors and patients alike, and to make a valuable, even if modest, contribution to the health care problem. — Richard H. Thaler

14. Procrastinator's Clock. For those who are chronically late to meetings, there's the Procrastinator's Clock, a downloadable program for your computer, that displays a digital clock that is guaranteed to be up to fifteen minutes fast. How fast? Well, that's the nudge. You are never exactly sure because the clock unpredictably speeds up and slows down. That assures that users can't game the system. We think that this device might help the lawyer of this team (who shall remain nameless) get to Noodles on time for lunch. A physical version of this clock has already been patented by a company called Emergent Technologies. — Richard H. Thaler

To approach these problems we once again rely on one of our guiding principles: transparency. — Richard H. Thaler

Psychologists tell us that in order to learn from experience, two ingredients are necessary: frequent practice and immediate feedback. — Richard H. Thaler

Self-control problems can be illuminated by thinking about an individual as containing two semiautonomous selves, a far-sighted "Planner" and a myopic "Doer." You can think of the Planner as speaking for your Reflective System, or the Mr. Spock lurking within you, and the Doer as heavily influenced by the Automatic System, or everyone's Homer Simpson. The Planner is trying to promote your long-term welfare but must cope with the feelings, mischief, and strong will of the Doer, who is exposed to the temptations that come with arousal. Recent research in neuroeconomics (yes, there really is such a field) has found evidence consistent with this two-system conception of self-control. Some parts of the brain get tempted, and other parts are prepared to enable us to resist temptation by assessing how we should react to the temptation.1 Sometimes the two parts of the brain can be in severe conflict - a kind of battle that one or the other is bound to lose. — Richard H. Thaler

Doctors are crucial choice architects, and with an understanding of how Humans think, they could do far more to improve people's health and thus to lengthen their lives. — Richard H. Thaler

Hundreds of studies confirm that human forecasts are flawed and biased. Human decision making is not so great either. Again to take just one example, consider what is called the "status quo bias," a fancy name for inertia. For a host of reasons, which we shall explore, people have a strong tendency to go along with the status quo or default option. — Richard H. Thaler

Wealth, too, is often separated into various mental accounts. At the bottom of this hierarchy sits the money that is easiest to spend: cash. — Richard H. Thaler

John Rawls (1971) called the publicity principle. In its simplest form, the publicity principle bans government from selecting a policy that it would not be able or willing to defend publicly to its own citizens. — Richard H. Thaler

Compare subliminal advertising to something just as cunning. If you want people to lose weight, one effective strategy is to put mirrors in the cafeteria. — Richard H. Thaler

On traditional economic theory:
We do not play chess as if we were a grandmaster, invest as if we were Warren Buffett, or cook like an Iron Chef. It is more likely we cook like Warren Buffett, who loves to eat at Dairy Queen. — Richard H. Thaler

average article written in a specialized academic journal is probably lucky to find 100 readers. — Richard H. Thaler

individual risk taking, especially in the domain of risks to life and health. — Richard H. Thaler

The three social influences that we have emphasized - information, peer pressure, and priming - can easily be enlisted by private and public nudgers. As we will see, both business and governments can use the power of social influence to promote many good (and bad) causes. — Richard H. Thaler

Trayless cafeterias. Cafeteria managers have been taking a keen interest in reducing food waste. Seeing how easy it is to load up a tray with extra food that often goes uneaten and extra napkins that go unused, curious managers and students at Alfred University in New York tested a trayless policy over two days. When trays weren't offered, food and beverage waste dropped between 30 and 50 percent! — Richard H. Thaler

I found the concept of hindsight bias fascinating, and incredibly important to management. One of the toughest problems a CEO faces is convincing managers that they should take on risky projects if the expected gains are high enough. Their managers worry, for good reason, that if the project works out badly, the manager who championed the project will be blamed whether or not the decision was a good one at the time. Hindsight bias greatly exacerbates this problem, because the CEO will wrongly think that whatever was the cause of the failure, it should have been anticipated in advance. And, with the benefit of hindsight, he always knew this project was a poor risk. What makes the bias particularly pernicious is that we all recognize this bias in others but not in ourselves. — Richard H. Thaler

An especially good way to gain weight is to have dinner with other people.11 On average, those who eat with one other person eat about 35 percent more than they do when they are alone; members of a group of four eat about 75 percent more; those in groups of seven or more eat 96 percent more.* — Richard H. Thaler