> Calculating the Irrational in Economics > By STEPHEN J. DUBNER > > the average investor is hardly the superrational "homo > economicus" that mainstream economists depict.
Who depicts it? What's the difference between "superrational" and "rational". > behaviorists are essentially calling for an end to economics as we know > it. A good reason to be wary. Most revolutions are just spin. > The point is that too many options > can flummox a consumer. So what? > Standard economics would argue that people are > better off with more options. Where does standard economics argue this? This sounds like straw. > But behavioral economics argues that people > behave less like mathematical models than like - well, people. No doubt many mathematical models are unrealistic. But their purpose is not to be realistic. > Among the behaviorists, there is the common sentiment that > economics has been ruined by math. Others say this also. > Richard H. Thaler. His paper, written with the legal scholar Cass R. > Sunstein, was called "Libertarian Paternalism Is Not an Oxymoron." > Mr. Thaler has concluded that too many people, no matter how > educated or vigilant, are poor planners, inconsistent savers and > haphazard investors. > His solution: public and private institutions should gently > steer individuals toward more enlightened choices. That is, they must be > saved from themselves. > Mr. Thaler's most concrete idea is Save More Tomorrow (SMarT), a > savings plan whereby employees pledge a share of their future salary > increases to a retirement account. That's a good idea, but it does not overturn economics. > an automatic asset > reallocation to keep an employee from holding more than 20 percent of his > portfolio in company stock. Better yet, use modern portfolio theory and invest only in index funds. Fred Foldvary ===== [EMAIL PROTECTED]