Ideas

Congratulations to Richard Thaler for Introducing Economics to Aesop’s Fables

Why it’s useful

Thaler noticed that humans behave irrationally in making financial decisions. Then he demonstrated that they do so in consistently predictable ways – much like the Grasshopper in Aesop’s The Ant and The Grasshopper.

Richard Thaler, who happens to be the father of one of my wife Kate’s old friends, was just awarded the Nobel “for his contributions to behavioral economics.”

Thaler noticed that humans behave irrationally in making financial decisions. Then he demonstrated that they do so in consistently predictable ways – much like the Grasshopper in Aesop’s The Ant and The Grasshopper.

As a personal finance expert who believes that behavior is the dominant variable in client success, I don’t think there is anyone more deserving.

I understand that it wasn’t easy for him. In recognizing that humans are not entirely rational, Richard Thaler had to battle an economic establishment who believed in the foundational premise that people are hard-wired to be rational optimizers. In many instances he suffered the intellectual dismissal of his peers.

From Daniel Kahneman’s Nobel prize in 2002 to Richard Thaler’s in 2017, economic theory is finally becoming grounded in the reality of how we humans make financial decisions.

* These are the general views of Jonathan DeYoe and they should not be construed as investment advice for any individual.

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* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

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* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* The original “Weekly Commentary” was prepared by Peak Advisor Alliance. Jonathan DeYoe is a member of Peak Advisor Alliance and adds, subtracts and edits before publishing.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* “Congratulations to Richard Thaler for Introducing Economics to Aesop’s Fables.”

Sources:

http://www.nationalgeographic.com/travel/features/tour-sites-zombie-undead-walking-dead-obsessed/
https://www.livescience.com/51335-greek-undead-spirits.html
http://whc.unesco.org/en/list/709
http://www.investopedia.com/terms/z/zombies.asp
https://www.economist.com/blogs/buttonwood/2017/01/light-bulb-moment (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_TheEconomist-The_Curious_Case_of_Missing_Global_Productivity_Growth-Footnote_9.pdf)
https://www.positivityblog.com/22-inspirational-quotes-on-fear/