Thaler has answers for almost everything (except the rise of Trump)

WASHINGTON— Outside economics, Nobel laureate Richard Thaler is probably best known for appearing alongside pop star Selena Gomez in the movie The Big Short, explaining how human mistakes contributed to the financial crisis. On Monday, Thaler spoke by phone with The Associated Press.

On how people react to “unfair” prices: “It can work either way. You know, people might be unwilling to buy something that they would really value just because they think that the price is higher than it usually is. There are a couple Cubs games in town this week that are selling for higher prices than usual, and if people think that’s unfair, maybe they won’t go, even though they would enjoy it. The flip side of it is that firms that violate these norms of fairness can make customers angry. And I think Uber has learned this lesson or is in the process of learning it.”

How a behavioural economist might interpret Donald Trump’s election as U.S. president: “I think behavioural economists don’t have any more of an explanation about the rise of Trump than anyone else.”

On economic policy: “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.”

Investing advice: “Well, I think the biggest mistake people make in most domains is overconfidence. If you’re trading individual securities, you’re almost certainly making a mistake. Because most professional managers can’t outperform their benchmarks and there’s little reason to think that individuals can.”

More advice: “Don’t get trapped by looking at what the price was that you paid for some stock originally. I always tell people, ‘If you wouldn’t buy the stock now, you should sell it.’ Especially if a stock has gone down, people are reluctant to sell it because they don’t want to admit they made a mistake.”