> 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
> behaviorists are essentially calling for an end to economics as we know
A good reason to be wary.
Most revolutions are just spin.
> The point is that too many options
> can flummox a consumer.
> 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.