“Where economists make the fundamental mistake is they think that money is money”

Rory Sutherland: Perspective is everything. One of the best TED talks to date.

Economics as a study (I’m not ready to call it a science) has a ways to go before realizing its full potential for improving human outcomes. One simple example of the fallibility for treating all money as the same is the St Petersburg paradox.

People are irrational in the eyes of economics, but what kind of study makes derogatory remarks about its subjects as if the real world is suppose to follow the rules of its inadequate models? Reminds me of the famous comments in 2007 by David Viniar, then CFO of Goldman Sachs, that 25-standard deviation events had occurred on several successive days. How dare nature disobey my models!

Good thing we have people like Daniel Kahneman, whose recent works point out rather methodically some unexpected outcomes of human behavior.