Richard Thaler Quotes

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. 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. 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. 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. 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. 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. 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. Why tie to gold? Why not 1982 Bordeaux? It would be much more consumer friendly for them to beep you when you swipe your card that says, uh-oh you're over your limit, are you sure you want to use that? 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. I think the people who've been the most overconfident in our business in the last decade have been the people that called themselves risk managers. So, what's a nudge? A nudge is some small feature of the environment that attracts our attention and alters our behavior. People are less likely to think it's immoral to walk away from their home if they know others who have done so. And if enough people do it, the stigma begins to erode. 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. If we think that high marginal tax rates are bad because they distort incentives, the same is then true for tax subsidies. I have an agent, John Brockman, who is an agent to many academic authors like Dan Gilbert and Steven Pinker, and he's very good at conning academics into writing books. He pulled this trick on me. Coining a term is not the same as creating a field! If governments want to encourage good citizenship, they should try making the desired behavior more fun. 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. Demanding that the rich get a tax cut as a condition for tax relief for others is simply elitist. 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. Although the United States cannot unilaterally lower the price of oil, it can reduce its consumption by using oil more efficiently and by developing alternative sources of fuel. 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. 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. One of society's thorniest problems is that children from poor families start school lagging badly behind their more affluent classmates in readiness. There's a reason why start-ups, especially disruptive start-ups - like Google or Amazon or Uber - are full of young people. That's because young people are not as wedded to the old fashioned ways of doing things. Academia does not provide many opportunities for immediate gratification. You work for two years on a project, it takes two more years to get it published, and then you start hoping someone might read it. If no estate tax is imposed, capital gains taxes can be avoided indefinitely. If you want to encourage some activity, make it easy. People make just as many mistakes when the stakes go up, maybe more.