Books That It Is Time to Reread: Richard H. Thaler (2015): Misbehaving: The Making of Behavioral Economics: (0393080943): A Rationalist writes: "'The foundation of political economy and, in general of every social science, is evidently psychology...
...A day may come when we shall be able to deduce the laws of social science from the principles of psychology. —Vilfredo Pareto, 1906
Misbehaving is a thoroughly enjoyable read, both comprehensive and replete with historical context, but "neither a treatise nor a polemic" as prefaced by Thaler. Instead, it is a memoir and a chronological history on the rise of behavioral economics as a legitimate discipline, making it an excellent introduction to the field. The book is lengthy, an un-lazy 358 pages, but an easy read because of Thaler's self-deprecating style and numerous examples that are both funny and informative (like oenophile mental accounting). My favorite illustrative anecdote, however, was the kerfuffle that ensued among the "efficient market" professors at the University of Chicago when it came time to hold a lottery on allocating offices in their new academic building - hilarious.
I got hooked on behavioral economics almost 20 years ago at a conference held on the topic at Harvard's Kennedy School, featuring Richard Thaler, Richard Zeckhauser, Arnie Wood and others. The seeds planted from that fascinating seminar led me to be a lifelong student of this emerging, multi-disciplinary field and the importance of metacognition - quite literally, thinking about thinking. For an alcoholic, admitting you have a problem is the first step towards recovery. Analogously, it is impossible to temper evolutionarily prewired heuristics and biases unless you have studied them - and even then, it is too easy to 'fall off the wagon.' Anchoring, myopic loss aversion, overconfidence and hyperbolic discounting are all pervasive, but you have to understand the nature of these inherent biases to have any chance of counteracting them in your own behavior, both personally and professionally...
