Behavioural economists believe a gentle nudge in the right direction can make you richer and over recent years they have managed to win the ears of governments around the world – including the UK’s.
This week one of the thinkers who helped spread the word on behavioural economics, Professor Richard Thaler, won a Nobel Prize for economics.
In the old world of economics textbooks, people behaved perfectly rationally and made the right choices. In the real world, of course, we don’t. We make irrational decisions that fly in the face of economic theory all the time.
Yet, our irrational behaviour can be an asset. It means that we can be nudged into making the best choices.
Professor Thaler’s catch-all advice is whether you’re a business or a government, if you want people to do something, make it easy.
In Britain, one example adopted by the Government has been pensions.
Instead of getting people to opt into a pension, we’re now automatically enrolled and then offered the chance to opt out. It’s now easier to have a pension than not to. Unsurprisingly, more people now save into pensions.
On this week’s podcast, Simon Lambert, Rachel Rickard Straus and Georgie Frost take a look at Professor Thaler’s work, his prize, behavioural economics and the whole nudge idea. Does this all really work?
Also, on the show we look at the ONS’ new price per square metre map of UK house prices and whether it tells us anything new – and we pick up on an interesting report from estate agent Savills on how to get homes built and sold for less than the market price.
With mortgage rates suddenly taking a step up we look at whether now is the time to fix, how to find the best deal and what you should do if you’re already on a fixed rate but think you may miss out on the cheapest deals by the time it finishes.
Also on the agenda, we lift the lid on a new batch of ‘better’ savings rates coming to the market and dive into why shares, bonds, property and other asset prices rise.
And finally, Simon tells us about the new Great British Entrepreneur’s Challenge in which This is Money and entrepreneur Andy Yates are looking to find a start-up and help it grow.
Enjoy.
