Misbehaving

Content Warning: This guide quotes the author’s use of an offensive term about people with mental health conditions. 

A central theme in Misbehaving is the impact of human psychology on economic decision-making. Thaler contests the orthodox economic model, which advances individuals as rational entities consistently acting to amplify their utility. He suggests real individuals—whom he dubs “humans”—frequently display irrationality due to cognitive biases, emotional influences, and other psychological factors. This theme resonates throughout the book as Thaler employs a range of anecdotes and experimental evidence to demonstrate how human choices often diverge from the predictions of standard economic theories.

Thaler provides multiple examples to show how human psychology contradicts rational economic decision-making. In Chapter 3 he underscores scenarios where human actions clash with rational economic principles. He presents commonplace situations—like the hesitation to spend on conveniences or the inconsistency in appraising time versus money—that contravene logical economic rationale. Similarly, in the exploration of “mental accounting” in Chapter 7, Thaler delineates how people illogically segregate and handle money, flouting the economic concept of fungibility. Psychological principles, he shows, are as useful to understanding economics as economic ones.

A story from Chapter 2 set during the reign of Michael Jordan with the Chicago Bulls illustrates this human factor and its nuances in decision-making.