It turns out that few people think like economists. They evaluate their choices according to where they start, not where they might end up, and much more than they like gaining, they hate losing.
.The reason we are reluctant to quit a bad investment, but instead ‘throw good money after bad’, is that giving it up is experienced as a loss, even if it is the rational thing to do.
Some economists tend to dismiss such behaviour as irrational and thus irrelevant to their models.
Thaler found Kahneman and Tversky’s work exciting because they had shown that such behaviour was the rule, not the exception.
Almost no one acted like the rational, self-interested, and utility-maximising individual assumed in standard economic models. Thaler referred to this fictional person as an ‘Econ’, to be contrasted with a ‘Human’, who makes silly decisions and is easily distracted.
So what is point of economics if it doesn't describe the world?
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