Misbehaving: The Making of Behavioral Economics - A Comprehensive Summary
What do economics, psychology, and experimental science have in common? As Richard Thaler implies in Misbehaving, most economists would say little to none—but this couldn’t be further from the truth. Misbehaving is, first and foremost, a story of how modern economics, finance, and theoretical analysis have become increasingly specialized and narrow without substantial practical value. Utilizing empirical studies and anecdotes, funny stories, and even some jokes, Thaler persuades the reader that behavioral studies—or psychology-motivated disciplines which focus on humans, not mythical rational agents—are here to stay. Finally, as the book progresses, it becomes increasingly clear that a behavioral revolution in the realm of public policy is on the horizon. Ultimately, organizations will not thrive unless their assumptions and forecasts focus on people.
Connection to Ethical Systems:
Thaler’s findings have numerous and far-reaching implications for designing and implementing ethical systems within organizations. In order to promote a strong ethical culture, widespread awareness of policies and modeling ethical behavior remain imperative at all levels.
On the managerial side, incentivizing ethical behavior in the workplace can be achieved via simple guidelines. First, if issues exist, make it easier for employees to speak up within the company. This can be done by reducing red-tape and bureaucratic measures, adding an omsbuds program and creating a whistleblowing hotline. Secondly, it is important to remember that people—not economic models—are highly sensitive to fairness and emotional impact. If you want employees to act justly and productively, acknowledge how business decisions will affect communities and employees. Lastly, swift, systematic punishment for unethical behavior should be broadcast widely to reinforce their commitment to ethics and regulation.
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