People make poor economic choices. Tell me something I don’t already know.
Richard Thaler from the University of Chicago recently won the Nobel economics prize for proving that people don’t act rationally. Their behavior, instead, causes them to:
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Save too little for retirement.
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It stops them from cutting their losses on bad investments.
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It causes them to deny their own financial mistakes, and
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It allows them to rationalize buying houses or stocks when prices are high, thinking they’ll just keep going up.
Thaler is considered to be one of the founders of behavioral economics, by changing the way economists look at the world.
Instead of acting rationally, when it comes to money, people are just the opposite. For his work, he won the million dollar Nobel Prize in economics. After thirty years in the financial services business, I could have provided the same information…..for a mere (sic) half million dollars. I have always believed that even if the math can be proven correct, a person’s emotions will decide the course of action taken in their financial lives.
