- He urges economists to rethink the limits of human rationality and the models that define modern economics
- Reflecting on inequality and democracy, Thaler warns that trillionaires hold growing influence while political leaders face hard limits on how far they can turn the screw of redistribution
LONDON
Richard Thaler has spent a career proving that humans are not quite as rational as economists once believed.
His new book, "The Winner’s Curse: Behavioral Economics Anomalies, Then and Now," revisits decades of research that upended the discipline—from the quirks of auction bidding to the psychology of saving and spending.
As one of the founding fathers of behavioral economics and a winner of the 2017 Nobel Prize, Thaler’s influence extends far beyond academia. His ideas have shaped public policy, inspired governments’ “Nudge Units,” and quietly changed how we think about markets, money, and ourselves.
When he sat down in London to discuss his latest work, Thaler was as sharp and mischievous as ever.
The conversation ranged widely: from artificial intelligence and data to inequality, democracy, and even the newly elected mayor of New York, Zohran Mamdani.
'Most interesting anomalies now are coming from big data'
Economists, Thaler likes to say, have long believed in mythical creatures—“Econs” who always make perfect, logical choices.
Real humans, by contrast, are messy, emotional, and often inconsistent. That simple observation gave birth to behavioral economics.
More than 30 years after Thaler first challenged the idea that humans are “perfectly rational,” the new book revisits his original collection of “economic anomalies”—moments when people’s real-life behavior breaks all the rules of classical economics.
“I will say the most interesting anomalies now are coming from big data that we don’t need AI quite yet to find them,” he said during an interview with Anadolu.
But Thaler is looking beyond anomalies to something more body_abstract: the limits of the human mind itself. “If we’re continuing to have models that people maximize,” he said, referring to the assumption that humans always make optimal decisions, “we have to qualify that as a function of how hard the problem is.”
In other words, people only optimize what they comprehend. “For very difficult problems, maximization is a terrible model; for an easy problem, it’s easy,” Thaler explained with a grin. “So the question we pose at the end of the book is, can we have a measure of how hard a problem is? But it comes with a warning—that is itself a very big problem.”
Behavioral economics, in Thaler’s hands, is less a demolition of theory than a humanizing of it.
“Behavioral economics is extraordinarily well represented among the profession,” he says. “There are behavioral economists in every top economics department and business school… So the field is thriving.”
Yet, as he notes with a touch of irony, academia still clings to its old frameworks. “What hasn’t changed are the textbooks... Economists still think of economics as the field with those maximizing agents, and that that’s what makes it different from psychology or anthropology or sociology.”
Behavioral insights, he says, are often tucked away as curiosities. “There’ll be a chapter on the theory of the firm, and you’ll learn… you maximize profits by setting marginal cost equal to marginal revenue. And then there’s a box saying, Oh, there’s this Winner’s Curse...”
He pauses, then adds lightly: “I don’t want to sound like I’m complaining and bitter—hardly.”
Unlike Thaler’s earlier classic Nudge, which focused on how to design better choices, The Winner’s Curse is more about the thrill of discovery—how economists found out that people don’t act like the tidy equations in textbooks.
This updated edition adds modern experiments, new data, and reflections on how behavioral economics has matured—and where it’s still struggling to fit into the traditional world of finance and policy.
Power and weakness of the nudge
Thaler’s best-known contribution, of course, is the “nudge.”
When he and Cass Sunstein published Nudge in 2008, the idea that governments could improve decision-making by subtly shaping the context—the “choice architecture”—seemed revolutionary.
The book’s core principle was libertarian paternalism: make the easy choice the right one, without taking away freedom.
But Thaler is quick to remind us that nudging isn’t new.
“Well, you know, I always say we didn’t invent nudging. It’s in the Bible,” he quips. “You know, Eve and that serpent and poor Adam—what could he do? And you know, Ponzi knew how to create a Ponzi scheme without reading Thaler.”
But Thaler’s “nudges” were meant to use that insight for good—helping people save for retirement, donate organs, or pay taxes on time.
Still, he laments how governments have implemented it. “The Nudge Unit in the UK, for example, doesn’t get to change the choice architecture. Typically, all they get to do is messaging. And now, you know, you get a text message, you probably don’t even read it, so I’m in favor of more choice architecture—but you know, I don’t run things.”
For Thaler, the difference between messaging and architecture is crucial.
A text reminder to pay your taxes is a “nudge.” But changing the default so you’re automatically enrolled in a pension plan—that’s architecture. And that, he argues, is where governments have been timid.
“Online investing encourages people to invest with very short-term goals,” he observes. “Warren Buffett is retiring and was the champion of long-term investing. People investing in Robinhood are investing in weekly options... that can’t be right.”
Inequality, Trump, and newly elected New York Mayor Mamdani
Few issues ignite Richard Thaler’s passion like inequality.
In his trademark plainspoken style, he uses a striking image: a screw that could, in theory, be turned to take money from the rich and give it to the poor.
“If we could turn that screw all the way,” he says, “economic theory warns growth would collapse—no one would have any incentive to work. But let’s be honest, we’re nowhere near that. We have trillionaires.”
For Thaler, the metaphor captures both the need for redistribution and the limits of power.
“It’s reasonable to ask how far we should turn that screw—and how. The problem is, the people who would lose the most have the most influence. And if we still have democracy—which is not certain right now in the US—then any change can only go as far as the system allows.”
Even politicians who dream of shaking things up, he notes, quickly discover the boundaries of real-world power.
“We just had a self-declared socialist elected as mayor of New York City,” Thaler says. “He’ll soon realize he can’t actually turn that screw. Maybe he can make bus rides free—but that’s about it.”
Asked how far he would go if given the power, Thaler shrugs: “I don’t know. And how would we do it? I don’t know.”
He doesn’t hide his concerns about the bigger picture either. “Climate change hasn’t gone away—it’s still a major threat to the global economy. And now there’s a new one: Trump. If the US starts treating its allies as enemies, that’s really bad.”
