Misbehaving: The Making of Behavioral Economics

Kahneman and Tversky focus on changes because changes are the way Humans experience life.

Roughly speaking, losses hurt about twice as much as gains make you feel good.

A slow hunch is not one of those “aha” insights when everything becomes clear. Instead, it is more of a vague impression that there is something interesting going on, and an intuition that there could be something important lurking not far away. The problem with a slow hunch is you have no way to know whether it will lead to a dead end. I felt like

The core premise of economic theory is that people choose by optimizing. Of all the goods and services a family could buy, the family chooses the best one that it can afford.

Sometimes the invisible handwave is combined with the incentives argument to suggest that when the stakes are high and the choices are difficult, people will go out and hire experts to help them. The problem with this argument is that it can be hard to find a true expert who does not have a conflict of interest. It is illogical to think that someon

good rule to remember is that people who are threatened with big losses and have a chance to break even will be unusually willing to take risks, even if they are normally quite risk averse.

the other major workhorse of economic theory, that of equilibrium.

Optimization + Equilibrium = Economics.

Many years later Kahneman and Tversky would call this distinction “framing,” but marketers already had a gut instinct that framing mattered. Paying a surcharge is out-of-pocket, whereas not receiving a discount is a “mere” opportunity cost.