ABSTRACT
Richard H. Thaler and Cass R. Sunstein's Nudge was motivated by a belief that rational choice theory, with its assumptions that economic decisions are made rationally, was inadequate for understanding many human behaviors. Research in behavioral economics suggested that people often made "irrational" errors in decision-making. Richard Thaler was trained in neoclassical economic thinking during his PhD in the 1970s. By the time Thaler and Sunstein were writing Nudge in the 2000s, behavioral economics had documented a large body of psychological evidence showing that people did in fact often behave "irrationally" by the standards of rational choice theory. In the field of finance, Richard Thaler and the economist Werner De Bondt found that psychological biases influenced the functioning of the stock market. In 2008, the same year Nudge was published, the business professor John Beshears and colleagues documented ways in which the market would not necessarily make people behave rationally, as assumed in neoclassical economics.
