Quotes by Richard Thaler - Page 3

Real people have trouble balancing their checkbooks, much less calculating how much they need to save for retirement; they sometimes binge on food, drink, or high-definition televisions. They are more like Homer Simpson than Mr. Spock.
Richard Thaler / Economist
Binge
Calculating
Drink
Retirement
Balancing
Mr
Homer
How Much
Real People
Save
Simpson
Spock
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Retirement savings is probably behavioral economists' greatest success story. It is a prototypical behavioral-economics problem because saving for retirement is cognitively hard - figuring out how much to save - and requires self-control.
Richard Thaler / Economist
Retirement
Saving
Self
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Pundits are no better at forecasting election outcomes than they would be at predicting the final path of a hurricane. Smart pundits should consider either abandoning this activity or consulting with the geeks before rendering their guesses.
Richard Thaler / Economist
Activity
Consulting
Election
Forecasting
Outcomes
Predicting
Pundits
Rendering
Abandoning
Final
Geeks
Guesses
Hurricane
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The ability of businesses to monitor our behavior is already a fact of life, and it isn't going away. Of course we must protect our privacy rights. But if we're smart, we'll also use the data that is being collected to improve our own lives.
Richard Thaler / Economist
Data
Going Away
Privacy
Collected
Monitor
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he card companies will often, as a courtesy, honor that credit card, but hit you with a penalty. And you keep swiping your card for $3 at Starbucks for your latté, and you're getting hit with a $25 penalty because it's over your credit limit.
Richard Thaler / Economist
Cards
Honor
Over You
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The voting public is not very good at attributing credit and blame to presidents. They get too much credit when things go well and too much blame when things go badly. The same applies to coaches, C.E.O.'s, parents, and anyone else in charge.
Richard Thaler / Economist
Blame
Coaches
Credit
Voting
Anyone Else
Badly
Charge
Presidents
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Everyone's lost a lot of money on their 401k plans. I've heard some people calling them 201k plans. So it's even more important to get people to be saving more for retirement. Behavioral economics has helped us learn a lot about how to do that.
Richard Thaler / Economist
Important
People
Retirement
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The reason is they failed to learned the primary lesson we should have learned from when Long Term Capital Management went belly up ten years ago. That is, investments that seem uncorrelated can be correlated simply because we're interested in it.
Richard Thaler / Economist
Long
Should Have
Years
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I try to teach people to make fewer mistakes. But in designing economic policies, we need to take full account of the fact that people are busy, they're absent minded, they're lazy, and that we should try to make things as easy for them as possible.
Richard Thaler / Economist
Absent
Busy
Fewer
Lazy
Teach
Account
Mistakes
Designing
Economic Policies
Minded
Policies
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Traditional economics is based on imaginary creatures sometimes referred to as 'Homo economicus.' I call them Econs for short. Econs are amazingly smart and are free of emotion, distraction or self-control problems. Think Mr. Spock from 'Star Trek.'
Richard Thaler / Economist
Creatures
Distraction
Economics
Emotion
Imaginary
Self Control
Smart
Traditional
Amazingly
Based
Mr
Call
Star
Short
Homo
Problems
Referred
Spock
Star Trek
Trek
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Parents want their children to excel, callers to a victims' hot line want help, and sick people want to get well. Offering aids is like providing an alarm clock: it may help people get to an appointment on time, but no one is forcing them to use it.
Richard Thaler / Economist
Aids
Clock
Get Well
Offering
Providing
Sick
Time May People
Alarm
Appointment
Time Children Parents
Excel
Forcing
Help
Help People
Parents
Line
Victims
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It's hard to have any idea of how much money is enough to finance an appropriate lifestyle in retirement. But if a lump sum is translated into a monthly income, it's much easier to determine whether you have enough put away to afford to stop working.
Richard Thaler / Economist
Finance
Appropriate
Determine
Income
Lifestyle
Retirement
Afford
How Much Money
Lump
Monthly
Sum
Translated
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A company invites their employees to sign up for a plan where every time they get a raise, some part of that raise goes to increasing their contribution rate to the 401k plan. In the first company we convinced to adopt this plan, saving rates tripled.
Richard Thaler / Economist
Employee
Firsts
Saving
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The lesson for businesses is you are dealing with real people. Those are your customers, those are your employees, those are your bosses, and the better you understand how real people tick, the more successfully you will be able to accomplish your goals.
Richard Thaler / Economist
Accomplish
Customers
Tick
Bosses
Businesses
Dealing
Employees
Lesson
Real People
Successfully
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When should we nudge and when should we shove, I think, it's a political judgment. Obviously in some situations we need shoves, we need laws. Fraud is against the law, murder is against the law, drunk-driving is against the law. We don't need just nudges.
Richard Thaler / Economist
Drunk
Law
Thinking
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I am all for trying to teach household finance in schools, starting as early as possible. And when it comes to high school, I think learning about compound interest is at least as important as trigonometry or memorizing the names of all 50 state capitals.
Richard Thaler / Economist
Finance
High School
Household
Memorizing
Teach
Compound
Schools
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"Save more tomorrow" is a nudge to help people do what they know they want to do, which is save more, but they can't bring themselves to save more now. Just like many of us are planning to go on diets next month, or maybe in two months, certainly not tonight.
Richard Thaler / Economist
People
Tonight
Two
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In the 1940s, economics started getting highly mathematical. It was basically because economists weren't smart enough to write down models of real behavior that they started writing down models of highly rational behavior - and they kind of forgot about humans.
Richard Thaler / Economist
Humans
Mathematical
Models
Rational
Smart
Economists
Forgot
Highly
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In some ways, the finding that financial education doesn't provide long-term payoffs is hardly surprising. After all, how much do you remember from your high school chemistry class? Unless you use chemistry at work, you probably don't recall much about ionic bonding.
Richard Thaler / Economist
Bonding
Chemistry
Long Term
Surprising
Education Work Your
Hardly
Recall
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Claiming that Social Security benefits are safe may sound naive, but my view is actually quite cynical. I believe that as long as the elderly continue to vote in large numbers, no Congress will renege on promised payouts for those already eligible to receive benefits.
Richard Thaler / Economist
Benefits
Congress
Cynical
Elderly
Large Numbers
Numbers
Safe
Security
Social Security
Vote
Believe I Believe Long
Claiming
Eligible
Large
Promised
Receive
Social Security Benefits
View
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Credit cards have been extremely profitable to banks. They're profitable not from the fees they collect from the retailers that use the credit cards, that pays the bills, but the real profits come from the interest payments and the charges to users that are unexpected.
Richard Thaler / Economist
Credit
Real
Use
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The same with the mortgage brokers that were selling people mortgages they couldn't afford. We shouldn't pay them on each mortgage they write. They should have what they call "skin in the game," where they've got to reimburse us if the guy who sold the mortgage defaults.
Richard Thaler / Economist
Games
Should Have
Writing
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Most of us think that we are 'better than average' in most things. We are also 'miscalibrated,' meaning that our sense of the probability of events doesn't line up with reality. When we say we are sure about a certain fact, for example, we may well be right only half the time.
Richard Thaler / Economist
Probability
For Example
Half The Time
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It is true that I am one of the co-authors of 'Nudge,' and I am a behavioral economist, but it does not mean that everything we write about in that book is behavioral economics, nor does it mean that my co-author, the distinguished legal scholar Cass Sunstein, is a behavioral economist.
Richard Thaler / Economist
Legal
Distinguished
Economist
Scholar
Behavioral
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Morality aside, there are other factors deterring 'strategic defaults,' whether in recourse or nonrecourse states. These include the economic and emotional costs of giving up one's home and moving, the perceived social stigma of defaulting, and a serious hit to a borrower's credit rating.
Richard Thaler / Economist
Credit
Factors
Giving Up
Morality
Rating
Recourse
Stigma
Strategic
Aside
Borrower
Costs
Credit Rating
Include
Perceived
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You go out on the practice range, and something kind of clicks, and you start hitting the ball very crisply. And you're sure that you've found it, the holy grail - that all you have to do is hold your hand in a certain way. Then you go out on the golf course, and it's completely disappeared.
Richard Thaler / Economist
Clicks
Golf Course
Hitting
Holy
Holy Grail
Range
Certain Way
Disappeared
Grail
Something Kind
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Is there a market for somebody selling a credit card that helps people pay down their balances? I think the question is yes. But it would have to be sold by a bank that's really willing to invest in being a trusted partner with its consumers, because they will make less money on each consumer.
Richard Thaler / Economist
Balance
People
Thinking
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If rather than setting the minimum balance as the lowest possible amount, so we keep people in debt for as long as possible, we raise the minimum payment and encourage people to pay off their credit cards, we're going to make less money, but we're going to have costumers that are more solvent.
Richard Thaler / Economist
Balance
Long
People
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If there is one thing that most economists agree about in the realm of tax policy, it is that it's best to broaden the base of any tax, all else being equal. That means minimizing the number of deductions and exclusions from taxable income in order to lower marginal rates and reduce distortions.
Richard Thaler / Economist
Agree
Equal
Income
One Thing
Order
Policy
Tax
Base
Broaden
Deduction
Economists
Number
Lower
Marginal
Rates
Realm
Reduce
Tax Policy
Taxable
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It's essential that we understand things like the free-rider problem, but we also need to understand that, fortunately, humans are a little nicer than economists give them credit for. Some people actually leave money at roadside fruit stands; some people give money to NPR so we can listen to it.
Richard Thaler / Economist
Credit
Fruit
Humans
Npr
Roadside
Money People Credit
Economists
Essential
Fortunately
Nicer
Some People
Stands
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People worry that if they buy an annuity and then die before the policy starts to pay off, their heirs will lose out. I tell them, "What you should be more worried about is if you outlive your money, you will have to move in with your kids. Ask your kids which of these outcomes they are more worried about."
Richard Thaler / Economist
Kids
Moving
People
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In the world of traditional economics, it shouldn't matter whether you use an opt-in or opt-out system. So long as the costs of registering as a donor or a nondonor are low, the results should be similar. But many findings of behavioral economics show that tiny disparities in such rules can make a big difference.
Richard Thaler / Economist
Tiny
Behavioral
Big Difference
Donor
Registering
Similar
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How can government reduce the frequency and the severity of future catastrophes? Companies that have the potential to create significant harm must be required to pay for the costs they inflict, either before or after the fact. Economists agree on this general approach. The problem is in putting such a policy into effect.
Richard Thaler / Economist
Frequency
Harm
Severity
Significant
Economists
Inflict
Reduce
Required
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The government employs scientists of many varieties in technical capacities, from estimating the environmental toxicity of a chemical to the structural soundness of a bridge. But when it comes to forming policies, these scientists and, especially, behavioral scientists are rarely at the table with the lawyers and the economists.
Richard Thaler / Economist
Environmental
Behavioral
Bridge
Capacities
Chemical
Economists
Employs
Forming
Lawyers
Policies
Rarely
Scientists
Structural
Technical
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Arthur Laffer's idea, that lowering taxes could increase revenues, was logically correct. If tax rates are high enough, then people will go to such lengths to avoid them that cutting taxes can increase revenues. What he was wrong about was in thinking that income tax rates were already so high in the 1970s that cutting them would raise revenues.
Richard Thaler / Economist
Arthur
Cutting
Income
Income Tax
Thinking People Will
Correct
Logically
Lowering
Rates
Revenues
Tax Rates
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LTCM lost money when Russia defaulted on a certain class of bonds, and then they had other investments like on the spread between two different kinds of shares of Royal Dutch Shell Oil Company. Now that seems completely unrelated to Russian bonds. But they were related because other hedge funds saw similar discrepancies and they were all making similar bets.
Richard Thaler / Economist
Class
Russia
Two
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Maybe you'll take the cash out. So a credit card company or a bank that goes into the business of saying we're going to be the broker, we're going to sell you a mortgage that you're going to be able to pay off, we're going to help you reduce your credit card debt, we're going to help you save for retirement, we're going to put you into mutual funds that have low fees rather than high fees.
Richard Thaler / Economist
Credit
Debt
Retirement
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The money has to be deferred with what they call "clawback," which means they can get it back if I lose it all. So that guy making ten million a year selling credit default swaps, if we're going to keep five million of it in escrow for ten years, and with the right to go back and get it, if he starts losing money, then we're going to give people the right incentives not too take so much risk.
Richard Thaler / Economist
Mean
People
Years
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Rip Van Winkle would be the ideal stock market investor: Rip could invest in the market before his nap and when he woke up 20 years later, he'd be happy. He would have been asleep through all the ups and downs in between. But few investors resemble Mr. Van Winkle. The more often an investor counts his money - or looks at the value of his mutual funds in the newspaper - the lower his risk tolerance.
Richard Thaler / Economist
Naps
Rip
Years
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In a typical 401k plan, when you first become eligible you get a big pile of forms and you're told, fill out these forms if you want to join. Tell us how much amount you've saved and how you want to invest the money. In, under automatic enrollment you get that same pile of forms but the top page says, if you don't fill out these forms, we're going to enroll you anyway and we're going to enroll you at this saving rate and in these investments.
Richard Thaler / Economist
Saving
Typical
Want
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