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40 Exceptional Richard Thaler Quotes

Richard Thaler is an American economist and author on the subject of behavioral finance. Thaler has participated in more than a half dozen publications and is a distinguished professor at the University of Chicago Booth School of Business. Over his lifetime, Thaler has shared a multitude of advice. Here is a look at some of the best Richard Thaler quotes.

“A choice architect has the responsibility for organizing the context in which people make decisions.”

“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.”

“A good rule of thumb is to assume that everything matters.”

“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.”

“Every American worker should be able to save for retirement via payroll deductions.”

“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.”

“First, never underestimate the power of inertia. Second, that power can be harnessed.”

“I don’t go by the ratings. I buy wine that tastes good. Statistically, anybody’s ability to predict what will be a good wine a decade from now is limited.”

“I think one lesson we have to learn is that there’s a lot more risk than we’re giving credit to, a lot more what economist calls systematic risk.”

“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.”

“I think we also have learned the lesson that we have to have better incentive structures.”

“If people just put away what’s left at the end of the month, that’s a recipe for failure.”

“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.”

“I’m all for empowerment and education, but the empirical evidence is that it doesn’t work. That’s why I say make it easy.”

“Investors must keep in mind that there’s a difference between a good company and a good stock. After all, you can buy a good car but pay too much for it.”

“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.”

“It turns out, that men, when they’re taking care of their business, they’re not fully attending to the task at hand, but, I’m sure there’s an evolutionary explanation for this, if you give them a target, they will aim.”

“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?”

“Most economists, including me, agree that longevity insurance would make sense for a lot of people.”

“Most people start claiming benefits within a year of when they become eligible, although benefits increase substantially if they wait.”

“My mantra is if you want to help people accomplish some goal, make it easy.”

“One simple step firms can take is make sure that people that are getting paid a lot of money, say more than a million or two, that a big chunk of that money is deferred. That’s going to change the whole ballgame.”

“People are more likely to keep what they start with than to trade it, even when the initial allocations were done at random.”

“People exaggerate their own skills. they are optimistic about their prospects and overconfident about their guesses, including which managers to pick.”

“People have a strong tendency to go along with the status quo or default option.”

“Psychologists tell us that in order to learn from experience, two ingredients are necessary: frequent practice and immediate feedback.”

“Real people have trouble with long division if they don’t have a calculator, sometimes forget their spouse’s birthday, and have a hangover on New Year’s Day.”

“Recall that people like to do what most people think it is right to do; recall too that people like to do what most people actually do.”

“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.”

“The assumption that everybody will figure out how much they have to save and then will just implement that plan is obviously preposterous.”

“The first misconception is that it is possible to avoid influencing people’s choices.”

“The lesson from behavioral economics is that people only save if it’s automatic.”

“The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.”

“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.”

“There are cases when I can make myself better off by restricting my future choices and commit myself to a specific course of action.”

“There’s a second component of a good savings plan, which is something that a colleague of mine called Schlomo Benartzi and I developed many years ago, that we call”save more tomorrow.””

“There’s no reason to think that markets always drive people to what’s good for them.”

“When an economist says the evidence is”mixed,” he or she means that theory says one thing and data says the opposite.”

“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.”

“You want to nudge people into socially desirable behavior, do not, by any means, let them know that their current actions are better than the social norm.”

Here is a great interview with Richard Thaler as he sits down with the people of ‘Big Think’ and discusses the subjects of behavioral finance.

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