Behavioural economics has far-reaching effects

ALL his working life, Richard Thaler, who was awarded the Nobel Prize in economics last month, said he has been pleading with his fellow economists that they should be studying real people, not the idealised, so-called "rational" beings around which much of mainstream economics revolves.

Indeed, in their work, many economists don't even refer to people as people; they call them "economic agents". The typical "agent" is relentlessly selfish, perfectly informed, clairvoyant, maximises gains as a consumer and profits as a producer and operates independently of social context, as if living in a hermetically sealed container.

Prof Thaler calls this species "econs" and declares them to be "complete jerks": they are know-it-alls who can make perfect forecasts, will steal your money if they can get away with it, will give nothing to charity and have no self-control problems. In other words, the econ - a…