Nobel Economist Reveals Why Economic Models Keep Failing Us - ft. Richard Thaler | Capitalisn't

Why do economic models keep failing us? Nobel Prize-winning economist Richard Thaler reveals the answer in this live Capitalisn't episode. For decades, economics assumed humans are perfectly rational actors who optimize every decision. Thaler spent his career proving this fundamentally wrong and showing why behavioral economics matters for everything from retirement savings to healthcare policy. In this conversation, Thaler explains how economics went off the rails after WWII when models became increasingly mathematical and agents kept getting "smarter" even as they diverged from reality. He discusses why concepts like temptation and self-control were obvious to everyone except economists, how individual-level data finally made behavioral economics undeniable, and why acknowledging human imperfection leads to better policy design. Thaler walks through the impossible math of retirement planning, the Affordable Care Act's biggest design flaws including the disastrous "catastrophic" branding, and why capitalism needs serious improvement. From regulatory “sludge” and America's infrastructure crisis to Google buying Waze, he shares his take on what's broken and how we can fix it incrementally. Thaler is out with an updated edition of his bestselling book "The Winner's Curse: Paradoxes and Anomalies of Economic Life" with co-author Alex Imas. From Silicon Valley using behavioral insights to keep you scrolling to junk fees and dubious subscriptions, this is your guide to understanding how human irrationality shapes economics and policy. Timestamps 0:00 - Are Humans Irrational? 1:02 - Why Did Economics Assume Perfect Rationality? 3:19 - How Economic Agents Got Smarter in the 70s and 80s 5:01 - Retirement Saving: The Impossible Optimization Problem 7:35 - The Role of Data in Economics 9:51 - Winning with Data 43:00 - Breakneck: Engineers vs Lawyers (China vs US) 45:23 - Regulatory Sludge Is Bipartisan 47:29 - Improving Capitalism Incrementally 48:15 - Fixing the Affordable Care Act 49:03 - The "Catastrophic" Branding Disaster 51:52 - Automatic Enrollment: A Better Approach 53:32 - Closing Question: Would Rational Humans Be Better? Subscribe to @Capitalisn't for more conversations about what's working and what's not in capitalism, produced by the @StiglerCenter at @ChicagoBooth.