The Irrational Economy with Richard Thaler

Summary

The Weekly Show with Jon Stewart

Episode: The Irrational Economy with Richard Thaler
Date: February 4, 2026
Guest: Richard Thaler, founding father of behavioral economics and 2017 Nobel Laureate

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Episode Overview

Jon Stewart sits down with Nobel laureate and pioneering behavioral economist Richard Thaler to explore how and why traditional economics often fails to account for actual human behavior. The conversation covers foundational concepts in behavioral economics, real-world policy failures—including climate change and health care—and the tension between incremental “nudges” and the need for larger systemic “shoves.” With Stewart’s incisive and irreverent style, Thaler’s insights are demystified, critiqued, and set in context, offering listeners a deep dive into why the economy—and public policy—often seem so irrational and hard to fix.

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Key Discussion Points & Insights

1. What is Behavioral Economics?

• Traditional Economics vs Behavioral Economics
  • Traditional economics models “agents” as perfectly rational, logical, and self-interested (the “Spock model”), intentionally leaving out messy human behavior for mathematical simplicity [04:26–05:37].
  • Behavioral economics introduces the reality that real people are often irrational, inconsistent, and influenced by emotions, habits, and cognitive biases.
  • Thaler quips:
    • Thaler [04:26]: “There’s a guy smarter than me named Herb Simon...said [behavioral economics] seems like a pleonasm...a redundant phrase...what other kind of economics could there be?...Presumably, economics is about the behavior of people in markets.”

2. The Mug Experiment & the Endowment Effect

• Experiment:
  • Half a class randomly receives a mug; half do not.
  • Asked what price mug-owners would sell versus what price non-owners would pay.
  • Result: Owners demand about twice as much as buyers are willing to pay; only ~20% of mugs change hands. Traditional models predict 50% [08:00–12:35].
• Endowment effect and loss aversion: Having something makes people value it more, a tendency ignored by standard economics.
  • Thaler [12:04]: “If you’re endowed with something, you want to keep it...This is a phenomenon we call loss aversion.”
  • Stewart [12:35]: “The mug experiment is the genesis of behavioral economics… What you found is only 20% changed hands because of behavioral tendencies that were not included in the model.”

3. Behavioral Failures in Economic Policy

• Status Quo Bias: People stick with what they have, even when change would improve their lives [18:24].
• Real-World Relevance:
  • Stock inheritance: People don’t diversify inherited assets.
  • Housing: The “possession” model of economics doesn’t account for reluctance to switch or sell.
• Stewart [17:25]: “Standard economics misses all those externalities that are part of the human condition and therefore their models suck.”
• Thaler [17:30]: “We’ll not make a value judgment quite yet...But notice...people have a tendency to just stick with what they have.”

4. Behavioral Economics & Climate Change Policy

• Carbon Tax—as the “Economist’s Solution”
  • Standard economics says “get the price right” (carbon tax) and markets will resolve inefficiencies.
  • Barriers: Political and psychological; people hate taxes more than they appreciate subsidies [20:12–25:22].
  • Thaler [24:45]: “Economists know about externalities...But we don’t have carbon taxes. Why? …It’s because people hate taxes. They hate high prices. So what do we have? We have lots of subsidies.”
  • Stewart [24:55]: “But that’s not the goal of economics. The goal...is to make the most amount of money for your shareholders.”
• Behavioral Nuance:
  • Loss aversion explains policy failures: “We hate losing more than we like winning.” Thus, subsidies for green behavior are politically easier than punishing polluters.
  • Thaler [28:53]: “We’ll have all these policies where we subsidize you to do the right thing as opposed to penalizing you...for doing the wrong thing.”

5. Nudge vs Shove: Incrementalism's Limits

• Nudges:
  • Examples: Gas mileage labels, comparative utility bills, “opt-out” retirement plans [39:03–41:16, 57:14–62:16].
  • Stewart probes: Are nudges enough in addressing crises like climate change? Should we be considering “shoves” (systemic redesign)?
  • Thaler [41:48]: “If we want to design a system where the government just tells us what to do, as opposed to nudge us, wouldn’t that be worse?”
  • Stewart [42:47]: “When I say shove, it means understanding what 10,000 years of...human endeavor really means. We are a species that if shit’s easier, we will do it that way...We need to create robust markets in damage mitigation and carbon mitigation.”
• Policy Design:
  • Stewart: “You have to create shoves that create new avenues and new incentives that allow people to still enjoy the benefits of that progress while mitigating the damage” [56:10].

6. Behavioral Economics in Health Care & Retirement

• 401k Example:

  • Changing from “opt-in” to “opt-out” dramatically increased retirement saving rates.
  • Standard economists claim the checkbox shouldn’t matter; reality shows it does [59:02–62:16].

• Health Care (ACA):

  • Critique: The U.S. treats health care like a market, which is fundamentally exploitative and non-functional (“catastrophic plans” named to deter use) [66:24–70:53].
  • Thaler: Changing the name reduces uninsured by 10%—demonstrating “nudge” utility but not solving the underlying systemic problem.
  • Stewart [69:04]: “Catastrophic is how I would categorize the choice to treat health care like it’s a product...Making it more transparent doesn’t mean they’ll shop around…My point is, that’s a market that needs a shove.”

• Role of Incremental Change vs. Systemic Overhaul:

  • Stewart: “If we allow ourselves to be satisfied by these incremental positives...aren’t economists and policymakers...robbing us of an opportunity?”
  • Thaler’s Plan: “If we’re going to start with something, I wouldn’t start with that [Medicare for All]. I would start with catastrophic insurance for free for everyone” [73:41].
  • Stewart: “No, but they’re the ones we should be nudging and shoving—not consumers. I think we’re always shoving on the wrong end of the horse.” [74:26]

7. Corporate Power and the Limits of Policy

• Stewart emphasizes that corporations function as a “fourth branch of government,” often escaping effective regulation, and government must play an active role in countering their influence [74:56].
• Anecdotes on financial crisis, Fed independence, and regulatory capture.

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Notable Quotes & Memorable Moments

• Thaler [12:04]: “If you’re endowed with something, you want to keep it...This is a phenomenon we call loss aversion.”
• Stewart [17:25]: “Standard economics misses all those externalities that are part of the human condition and therefore their models suck.”
• Thaler [24:45]: “Economists know about externalities...But we don’t have carbon taxes. Why?...It’s because people hate taxes.”
• Stewart [42:47]: “When I say shove…it’s not telling people what to do. It's getting scientists to help us clean up this mess…You actually need to think completely differently and create a model that creates robust markets in damage mitigation and carbon mitigation.”
• Thaler [56:14]: “My mantra is design policies, make it easy.”
• Stewart [69:04]: “Catastrophic is how I would categorize the choice to treat health care like it’s a product…”

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Timestamps for Key Segments

| Timestamp | Segment/Topic | |-----------|---------------------------------------------------------| | 03:50 | Intro to behavioral economics, Thaler defines the field | | 08:00 | Mug experiment, endowment effect, loss aversion | | 12:35 | Link to real-world policy (inheritance, housing) | | 17:25 | Discussion on status quo bias and policy implications | | 20:12 | Carbon tax, political challenges, loss aversion | | 39:03 | Nudges: labels, bills, and incremental policy | | 42:47 | Stewart advocates for “shoves” rather than just nudges | | 57:14 | GPS & the importance of “making it easy” | | 59:02 | 401k opt-in/opt-out, nudges in retirement saving | | 66:24 | ACA, market failures in health care | | 73:41 | Catastrophic insurance for all: Thaler's policy suggestion |

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Reflections & Producer Debrief

• Post-interview: Stewart and producers reflect on the limits of incrementalism, the challenges of addressing systemic issues like health care and climate change, and the tension between nudges and the necessity for more fundamental, structural change [82:19–85:44].
• Producers note how behavioral economics can be a palliative rather than a cure for deeper, systemic injustices.

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Conclusion

Jon Stewart and Richard Thaler’s engaging, jargon-busting discussion lays bare the often-irrational side of the economy that standard models ignore and policy makers fail to address. While “nudges” can improve markets and policies in meaningful ways, both host and guest acknowledge the need for bolder action—especially where corporate power and systemic dysfunction prevail. Stewart’s push for shoves over nudges, and Thaler’s pragmatic defense of incrementalism, crystallize a lively, essential debate for anyone hoping to understand why economics and policy so often leave real people behind.

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[End of Summary]

Transcript

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[Jon Stewart]

Hey everybody. Welcome once again to the weekly show podcast with Jon Stewart. My name is Jon Stewart and we're going to be talking. You know, this has been, I feel like the news of the world has so matched the, the climate here in the Northeast, which is dark and gray and apocalyptic and this feeling that we are hurtling towards something just truly unimaginable and, and inexplicable. And it's why today I just don't even want to deal with it right now. I, you know, in, in all these different ways, today's show is going to be slightly different where once again, every now and again we'd love to bring on experts, people of such regard and, and note to come and play with me like let's say a person with a cat and like a little string toy, me being of course the cat, those individuals being the person. And today we want to talk about, you know, our ability as a country to fix the seemingly intractable systemic problems more economic and who better to do that with than an economist and an economist that has in some ways changed the way that economists talk about the incentives that go into our economy. He is a behavioral economist, which is something I didn't even know that there was but a brilliant thinker and another in our continuing series of brilliant thinkers. We obviously had Jeffrey Hinton who explained to me in childlike terms what AI actually is. And I'm, I'm sure this guest will, will be no different. So I'm excited to get to it. Let's, let's jump in now. Richard Thaler. So, ladies and gentlemen, in Our ongoing efforts to entertain and educate. We once again are going to welcome someone to the program who is so accomplished and smart that it'll be entertaining to watch him play with me like a monkey with a small grape. That's right. Our guest today, a professor from the University of Chicago, an American economist, the founding father, one of the founding fathers of behavioral economics, and awarded a Nobel Prize in econ in 2017, which I assume he will be giving to Donald Trump, because that's where everybody has to give their. Their Nobel Prizes. But please. Richard Thaler, thank you for joining us today.

[Richard Thaler]

It's a pleasure, John.

[Jon Stewart]

So most people think of economists as macro economists, micro economists. Then there's this idea. You. You sort of created this field called behavioral economics. So if you could just very briefly, and I apologize for the remedial nature of it, what is behavioral economics? How does it differ from what we consider kind of traditional economics? And. And how did you even think of it?

[Richard Thaler]

Yeah. So I'll. I'll use one fancy word you may not know, which is pleonasm, please.

[Jon Stewart]

Wait, what?

[Richard Thaler]

Pleonasm. Wow. So there's a guy smarter than me named Herb Simon who wrote a definition of behavioral economics and said the phrase seems like a pleonasm. What is that? A redundant phrase meaning what other kind of economics could there be? Presumably, economics is about the behavior of people in markets.

[Jon Stewart]

Yes.

[Richard Thaler]

Right.

[Jon Stewart]

Thank you.

[Richard Thaler]

So why do we need that? Well, the reason we need that is standard economics leaves out the people. They're all about the markets. And then there are firms and workers and governments and countries and consumers. There are no people. You pick up a big economics textbook, you'll not see the word people. There are agents. And these agents are. They're kind of like Spock in the old Star Trek series.

[Jon Stewart]

Logical.

[Richard Thaler]

Very logical and maximizing. They're as smart as the smartest economist.

[Jon Stewart]

So when. When economists make a model in terms of how a market is going to behave, the assumptions that they make are that the people that make up the model are logical, rational, and will and will behave in the manner that maximizes value in the model. Would that be right?

[Richard Thaler]

Yes. And they do that in part because that's the easiest kind of model to write down.

[Jon Stewart]

It works out simple.

[Richard Thaler]

Right. I mean, suppose you tried to write down a model of John wandering through Costco, okay, Choosing the optimal stuff to put in a basket. Right? I mean, no one can solve that problem. It's too hard. So you simplify the modeling task by saying, okay, he's going to choose the Best bundle. And that the math is easy.

[Jon Stewart]

Right.

[Richard Thaler]

And then they add to that an assumption that people are selfish jerks. Because that.

[Jon Stewart]

I mean, I don't want to say anything, but that seems like a relatively simple assumption.

[Richard Thaler]

Yeah. Okay. So the idea is, well, what if we introduce some people? Because there are people run firms, People interact in markets. In fact, more and more people are interacting in markets every which way. Right. You can bet on anything now, but.

[Jon Stewart]

How would that manifest? So if I'm an economist and I want to make a model about. And. And I assume they model what would be the most efficient market for cereal, and they want to model how you would create that. How would introducing what. What you're suggesting change. Yeah. Economic modeling, which I assume means you would be changing how policy is created. Because policy, I would assume, then is downstream.

[Richard Thaler]

Right.

[Jon Stewart]

From economic modeling.

[Richard Thaler]

Right. Good.

[Jon Stewart]

Okay.

[Richard Thaler]

So let's start with a simple experiment, please. We. We go into a classroom. I actually brought a prop. What a mug?

[Jon Stewart]

What are you, Carrot Top? What are we doing here?

[Richard Thaler]

Yeah, Professor, I got a mug here. All right, now, so what we did was we go into a classroom and we put a mug. I was teaching at Cornell at the time, so it was a Cornell and safety school.

[Jon Stewart]

Let's. Let's just point out very quickly safety school. All right?

[Richard Thaler]

Okay. William and sad.

[Jon Stewart]

Not. Sir, sir, we don't have time for this.

[Richard Thaler]

Okay? No slurs. So Cornwall is a very fine school.

[Jon Stewart]

Yes.

[Richard Thaler]

So every other student has a mug sitting in front of them.

[Jon Stewart]

Okay.

[Richard Thaler]

And their neighbor doesn't get a mug. Okay. Okay. Now, we have a market for the mugs. And we say, if you have a mug, John, you can sell it. Here's a price list. If it's $10, will you sell it or keep it? 950. And then you go down until. Okay, I'll sell at 8, but I won't at 750.

[Jon Stewart]

Okay.

[Richard Thaler]

All right. And then the guy sitting next to you, he doesn't have a mug. He has a price list at each of the following prices will you buy. Okay. So half the people are buyers. Half of them are potential sellers.

[Jon Stewart]

Okay?

[Richard Thaler]

So the mug's worth will be determined in this market.

[Jon Stewart]

Okay.

[Richard Thaler]

Now, what does economic theory say? It says the value you put on that mug should not depend on. On whether it's sitting right in front of you or on the desk next to you. Right. Well, it turns out. So the mugs are distributed at random. What we should see is, let's rank the people from highest to lowest on how much they like one of those Mugs. The half that like mugs the most should end up with them.

[Jon Stewart]

Yes, that's what traditional economics would tell you.

[Richard Thaler]

Right. Okay, so about half the mugs should change hands.

[Jon Stewart]

Oh, they're saying that they're assuming that there is a rationality to people's affection for the mugs.

[Richard Thaler]

Oh, well, then it doesn't depend on randomized. We did randomize. Okay, Right. They were handed out at random.

[Jon Stewart]

Yeah.

[Richard Thaler]

And the assumption is that the value you put on that mug shouldn't depend on whether it's sitting directly in front of you or adjacent to you.

[Jon Stewart]

Right.

[Richard Thaler]

Or in other words, whether you now own it. And that will be the key phrase. And we'll come back to that.

[Jon Stewart]

Okay, you do realize I am failing this class right now.

[Richard Thaler]

No, no, no, John, you're.

[Jon Stewart]

I have lost.

[Richard Thaler]

You're. You're. You're. You're doing great, you know.

[Jon Stewart]

All right, all right.

[Richard Thaler]

You know, at current grade levels.

[Jon Stewart]

Yes, sir.

[Richard Thaler]

A plus plus.

[Jon Stewart]

Oh, that's very kind of you, sir. Do I have a mug?

[Richard Thaler]

You know, you can buy one. All right, all right.

[Jon Stewart]

I didn't get a mug. Fair enough.

[Richard Thaler]

Okay, so what happens? The people who have the mugs really don't want to sell them. The people who don't have mugs aren't all that interested in buying one.

[Jon Stewart]

There's no market.

[Richard Thaler]

There is a market. But the people who have a mug demand about twice as much to give it up as the ones who don't have a mug are willing to buy it. Oh, so instead of half the mugs trading, we get about 20%. Okay, so what's the lesson? You know this old Stephen Sill song? Love the one you're with?

[Jon Stewart]

Sure.

[Richard Thaler]

I call this the endowment effect. That if you're endowed with something, you want to keep it, you won't give it up, but you don't have it, you know? Okay, if the price is right, I'll buy it.

[Jon Stewart]

Right.

[Richard Thaler]

This is a phenomenon we call loss aversion. That if you have something, you're going to fight like hell to keep it. If you don't have it. Meh. It's a mug. You know, the.

[Jon Stewart]

The mug experiment is the genesis of behavioral economics, if I can sum this up. Because traditional economics would say half the mugs would change hands based on value in markets and how they should operate in terms of people that have something and people that don't and people that want it. But what you found is only 20% changed hands because of behavioral tendencies that were not included in the model.

[Richard Thaler]

Correct. A plus.

[Jon Stewart]

Come on, brother. I'm going to give you guys a little insight into who I am as an individual. There's nothing that I enjoy more than what I like to call a little breakfast for dinner. Now, breakfast for dinner, it's, it's a treated. It takes me back to the childhood when you felt like, remember you get breakfast for dinner. And you were like, we're breaking all the rules.

[Richard Thaler]

What?

[Jon Stewart]

Scrambled eggs? Where am I? What world is this? Magic spoon. It gives you that feeling. Saturday morning cereal while you get there. 13 grams of protein, 0 sugar, 5 grams of net carbs per serving. Which is how I always chose my cereals when I was younger, I used to say to my mother growing up, how many. What's my, what's my net carbs here? 5 grams, 7 grams? What are we, what are we dealing with? How much protein in this bowl of chocolate Dracula cereal? That's right. Count Chocula. Man, did I eat like crap. But this stuff, Magic Spoon keeps you fueled. Whether it's breakfast, late night, snack, post workout, whatever it is. Magic Spoon. Look for Magic Spoon on Amazon or at your nearest grocery store. There are plant based versions of the cereal as well. Even vegans get to feel like they had a childhood. You'll find vegan options at Whole foods or get $5 off your next order at magic spoon.com TWS that's magicspoon.com TWS for $5 off. So this all sounds, if I may, insane to me because there could be somebody who is like, people have called me worse fetishist. But the idea that economics don't take into account because buy low, sell high takes into account greed. It takes into account you're. You're trying to get Val. It seems like basic economics does.

[Richard Thaler]

Here, let me. Yeah, let me give you an example.

[Jon Stewart]

Yeah.

[Richard Thaler]

Suppose that your uncle gives you an inheritance.

[Jon Stewart]

Sentimental. Is it a mug or is it something.

[Richard Thaler]

It's like a thousand shares of some stock.

[Jon Stewart]

Okay. But my uncle gave it to me.

[Richard Thaler]

Your uncle gave it to you.

[Jon Stewart]

All right?

[Richard Thaler]

So you send it over to your wealth manager or broker or whatever.

[Jon Stewart]

All right. The 1,000 shares I got from my uncle.

[Richard Thaler]

Yeah. And then the question is, do you keep them? Let's ignore taxes, okay?

[Jon Stewart]

Do I keep the shares or do I sell them or do you put.

[Richard Thaler]

Them into a index fund? Okay, well, economic theory would say the fact that if there are no tax issues, the fact you got those shares from your uncle, if you wouldn't have owned a thousand shares of that company before, you shouldn't now just put it in with all the other stuff, don't.

[Jon Stewart]

Do anything with it, just keep it.

[Richard Thaler]

No, not just keep it. Oh, diversify the way you would everything else.

[Jon Stewart]

So those thousand shares should be turned into. Some should be in higher risk, some should be in medium risk, some should be in fixed income. I should split that up in the manner that I would split up any asset that I have.

[Richard Thaler]

Exactly.

[Jon Stewart]

That's. That's what standard economic theory would say.

[Richard Thaler]

Right.

[Jon Stewart]

Standard economic theory says the best thing I would do is to do that. But behavioral economics says I won't do that for a variety of reasons. One being maybe I'm lazy. Two being maybe I have sentimental value to my uncle and therefore those thousand shares are the only thing I have to remember him by. Apparently I didn't take any pictures. I just have this thousand share inherited, so I'm. I'm not going to do that. And so standard economics misses all those externalities that are part of the human condition and therefore their models suck.

[Richard Thaler]

Well, we'll not make a value judgment quite yet.

[Jon Stewart]

Too pejorative. Too pejorative.

[Richard Thaler]

Too pejorative. You can say that. But let me just add that. Notice one result of this experiment is people have a tendency to just stick with what they have. So if they got a mug, they're much more likely to end up with it than if they didn't get a mug.

[Jon Stewart]

Okay, I see. What. Okay, okay. Possession, nine tenths of the law. So, and, and standard economics doesn't take in possession. And, and how far would this possession theory skew economic models if they don't take it into account? For instance, I have a house. So the theory of economics would be I will continue to try and get better, more valuable housing or diversify rather than just holding it since I have it.

[Richard Thaler]

Yeah. And it's that particular house. So we call this status quo bias. Okay. People have a tendency to just stick with what they have.

[Jon Stewart]

Yes. A body at rest tends to stay at rest.

[Richard Thaler]

Exactly.

[Jon Stewart]

Do they really not take this into account in standard economics? That seems insane to me. Like, is that really something they don't consider?

[Richard Thaler]

They would consider it if there's transaction costs, but in the stock example, there are none. The cost of changing a thousand shares of Google into. Put that money into an index fund will cost you $10. Right. So if it was an offer to buy your house, then there would be costs to moving and.

[Jon Stewart]

Yeah, it's a pain in the ass.

[Richard Thaler]

Right. But for most things, the economist would assume that because the cost of switching things around is low, we can ignore it.

[Jon Stewart]

So how does this manifest in, in markets? Because I want to, I want. The reason why I want to talk about this, and I'll give the broader example is, you know, things like climate policy or the ACA or those kinds of things, these are solutions to. Because economics is, in some ways it's, it's the lubricant that we use to create solutions to problems or better conditions for people's lives and how that affects all that. And I think the premise here is that standard economics misses and so the solutions that we design for the problems in our lives are ill conceived.

[Richard Thaler]

Great. So let's take climate change as an example.

[Jon Stewart]

Great.

[Richard Thaler]

All economists, including this one, think that the first thing we should have done when we figured out there was climate change is impose a carbon tax.

[Jon Stewart]

That. Wait, most economists think that.

[Richard Thaler]

Yes.

[Jon Stewart]

May I, may I suggest that that's incorrect?

[Richard Thaler]

You may, but I, I'm included in those.

[Jon Stewart]

Can I say why I think it's incorrect?

[Richard Thaler]

Yeah, sure.

[Jon Stewart]

So the minute you put a carbon tax on people, see their energy prices go up and you will no longer be serving in office politically.

[Richard Thaler]

Okay, but all right, then we're in agreement. What I'm saying is if you're God or king, you know, or president, and you could say, all right, what policy should we have? Then the correct policy is the one that sets the prices to give people the incentive. So if we increase the cost of heating your home.

[Jon Stewart]

Yes.

[Richard Thaler]

To reflect the externality, the, the cost you're imposing on other people, then you'll have the correct incentives to put in solar or insulate or switch to a heat pump or whatever. And so, yeah, we run a poll of expert economists every couple of weeks at the University of Chicago and there is one on that. And yeah, everybody says, yeah, that would be the ideal policy.

[Jon Stewart]

So they're saying a, a carbon tax would be the thing to solve the climate crisis because rather than changing the behavior, you have to make using fossil fuels, which are the driver of climate change, so much more expensive that it changes people's behaviors because they won't change behavior on their own. Is that standard economics or is that behaviorally.

[Richard Thaler]

No, that's standard economics. That's, that's standard.

[Jon Stewart]

Feels behavioral, but that's standard.

[Richard Thaler]

No, because it's standard because it's just changed the price. And then the alternative is we say, you're not allowed to have, we can't have cars that get less than such and such gas mileage, which we've done. We have. Right. So we have lots of regulations.

[Jon Stewart]

Okay.

[Richard Thaler]

We essentially don't have a carbon tax.

[Jon Stewart]

So the way we do it is so standard economics. What they say is we have a series of either incentives or regulations. So it would sort of be a mix of subsidies and regulations. And that is how we will manage the energy market while also keeping an eye on trying to reduce emissions. And that's how economists would design a program to solve it. So we've done that with. We subsidize solar, we subsidize electric vehicles, and we regulate the miles that they must get there. And they must have a catalytic converter.

[Richard Thaler]

Right.

[Jon Stewart]

All that is what you would consider to be standard economic theory.

[Richard Thaler]

No. No. So we're almost there.

[Jon Stewart]

I am fucking this up.

[Richard Thaler]

You are not. You're not. So what economists would say is we don't need all those rules and regulations, just set the price right.

[Jon Stewart]

But doesn't the market set the price? Doesn't. Isn't that free markets?

[Richard Thaler]

No. The, the carbon tax will automatically raise the price of a hummer, of operating a hummer because it only gets 8 miles to the gallon compared to some EV. So we don't have to regulate. All we have to do is get the price right. That's standard economic.

[Jon Stewart]

And then the market will change.

[Richard Thaler]

Then the market will change.

[Jon Stewart]

But isn't that just an intervention? How is that a market? That's just the government saying if we set a price that is unreasonable, then the market will behave.

[Richard Thaler]

It's just setting the price so that you have the incentive to act in a way that's best for society.

[Jon Stewart]

But that's not economics. Economics doesn't take into account what's best for society. It takes.

[Richard Thaler]

Yes, it does.

[Jon Stewart]

Wait a minute, wait a minute.

[Richard Thaler]

I'm. Well, let me hold on here. Economists know about externalities. And now here's the point I want to make. We don't have carbon taxes. Why? Because, and you started with this. So you got to the answer right away. You got to this because people hate taxes. They hate high prices. So what do we have? We have lots of subsidies.

[Jon Stewart]

Yes.

[Richard Thaler]

We have no taxes.

[Jon Stewart]

Well, we have. That's, that's not exactly. I mean, we have gas taxes. Like if you go to California, it's very different than buying gas in, in New York. It's very different than buying gas in Minnesota or, you know, that's, that's.

[Richard Thaler]

That's right. But even in high gasoline tax states, the taxes on emissions are still way too low compared to what they should be.

[Jon Stewart]

Compared to what they should be. If our goal is to reduce carbon emissions.

[Richard Thaler]

Right.

[Jon Stewart]

But that's not the Goal of economics. The goal of economics in a capitalist system is to make the most amount of money for your shareholders. So my point is, since when is economics about improving the human condition and not just making money for the companies that are extracting the fossil fuels from the Earth? Isn't that everything else is interventionist?

[Richard Thaler]

Okay, so I did not anticipate that my role here was going to be as the defender of neoclassical economics, but here I am.

[Jon Stewart]

We're here, baby.

[Richard Thaler]

I am here. And, you know, my economist friends will be proud that I'm defending them.

[Jon Stewart]

All right, beautiful.

[Richard Thaler]

So look, there's an economist named Arthur Pigou.

[Jon Stewart]

Oh, Pigou's work is. I'd never. I don't miss an essay.

[Richard Thaler]

Yeah, so, no, he's died 100 years ago, but that's what I meant. Anyway, there are Pigouvian taxes. So in any economics textbook, it will say that if you're causing some harm, then the way to fix it is, is to charge you for the harm you're causing so that you will decide just the right amount of harm.

[Jon Stewart]

Is Pigouvian familiar with the 2008 financial crisis? Because that is not what happens.

[Richard Thaler]

Okay, Now, I'm not saying any economist thinks that we have these optimal policies.

[Jon Stewart]

What I'm saying that's how it's supposed to work.

[Richard Thaler]

That's the way any economist basically would have advised. Take any council of Economic advisors before this one, because they always had real economists. They would all be saying something similar to, well, what we really should do is this. But then they would say, but it's true, boss, that people hate taxes. And if they're Republicans, they really hate taxes. But we all hate paying taxes. And so we'll subsidize EVs, we won't tax Hummers, and we won't tax gas, and we won't tax. And that all goes back to the mugs. That it's because we hate losing more than we like winning. So what we'll do is we'll have all these policies where we subsidize you to do the right thing as opposed to penalizing you via prices for doing the wrong thing.

[Jon Stewart]

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[Richard Thaler]

Yeah.

[Jon Stewart]

What I'm suggesting is all markets are designed to some extent. We sort of have this fiction that we live in a free market where it's only the rules of supply and demand and that our policies have to, you know, basically give way to these market forces that if left to their own devices will solve these. What I'm getting at is government intervention in markets is seen as a negative and paternalistic anti capitalist movement where muckety mucks and elites design systems that are not as efficient and functioning as capitalist markets. But we all know that that's a fiction that we intervene in markets, all that, you know, the big thing is always the government's not supposed to pick winners and losers, but they do it all the time and they've done it since time immemorial as governments.

[Richard Thaler]

Okay, so there are two different issues here. Putting a tax on a bad like pollution isn't interfering with markets. It's making the market efficient in the sense that the price people are paying reflects the cost they impose on others. And it's not picking winners and losers, it's picking. There will be losers. People who like to drive gas guzzling cars will lose. But we're not aiming it at them. It's a free choice.

[Jon Stewart]

No, they won't lose because let's say that's because they have the money to burn. It doesn't affect them. In other words, the, the downstream cost of the pollution that they create won't affect them because they are buffeted either by geography or wealth. So that the tax itself is.

[Richard Thaler]

No, but look, let's think of what we did. What did we do? We subsidized EVs and who was the beneficiary of that. Mostly rich guys.

[Jon Stewart]

But we also, the EPA regulated what you could put out into the environment. I mean, that's how we got cleaner air. When the government regulated what you could actually do.

[Richard Thaler]

That's true, but the choice to have subsidies and regulations, it benefited some companies versus others. Tesla was a big beneficiary of this.

[Jon Stewart]

Exactly. No, I'm saying government always picks winners and losers and then pretends like that's something that they can't do well. But Donald Trump's a great example. He's like, government can't pick winners and losers. Oh, Nvidia. I'll let you sell chips to China if you give me or Intel. How about this? I'll take 10% of your company. Like, I guess what I'm saying is aren't we all operating under a fiction? And if we were more, if we were more honest about the way economies worked, we could be more honest about the way we solve some of these larger scale problems.

[Richard Thaler]

So, okay, you're skipping one step ahead.

[Jon Stewart]

I don't want to do that. Take me back.

[Richard Thaler]

Take me back in a world where we don't know any of the people in any of the companies. So we're back in the world of inside an economist's head. We just have, there are firms and there are people and there's something people are doing that causes harm to others. The solution to that, that all economists agree to is put a price on that bad and then let the market clear and the people who produce bads will suffer. And if they're poor, they'll suffer more. But that's true of all policies and that part is uncontroversial. I'm not saying that's a world we live in. In fact, my point is.

[Jon Stewart]

So economists don't live in the world that we live in?

[Richard Thaler]

No, no, they live. They would say this is, they would call this a first best meaning if they could design everything, that's the way they would do it. They would try to make the prices reflect the harms that are people causing and then let the chips fall where they may. That's very different from giving contracts to your buddies, which has been going on at the local level as long as there have been politicians and buddies. We've just taken it to new levels.

[Jon Stewart]

Is the idea of behavioral economics to help economists get more grounded in what the actual externalities are? Is that the point? Because the way you're describing economists and the way that they talk about the economy seems utterly removed from, from reality to some extent.

[Richard Thaler]

No, no. Okay, so Here, here's where.

[Jon Stewart]

The worst student you have ever had.

[Richard Thaler]

Oh, John, you are so far from that. These are very good questions.

[Jon Stewart]

All right, let's get to it.

[Richard Thaler]

All right, so the, the, the point I want to start with is economists don't have a good answer to the question, why do we have only subsidies rather than taxes? Because as far as economists are concerned, they're the same. It's just a sign that if we subsidize the good thing or tax the bad thing. You know, if there are red mugs and blue mugs and the red mugs.

[Jon Stewart]

In their model, they see no distinction between a subsidy and a tax. And what you're saying is a tax is actually much worse than a subsidy in real world economics because people view losses as, as more damaging than wins, which is the subsidy.

[Richard Thaler]

Perfect. You nailed it. All right, so if, if we're trying to understand the world, it's important to understand this thing about losses and about status quo bias that the people tend to stick with what they have, and we can use that to help or hurt people.

[Jon Stewart]

So how would you, taking behavioral economics, staying with the, the, the climate model, if an economist would say it really makes no difference whether you do a tax or a subsidy, but very clearly we only do subsidies. So somebody must understand the political realities of all this. How would a behavioral economist sought. Because he. Here's, here's what I'm trying to get to. We've understood since the 70s that the world is warming through our climate policies. They've had Kyoto treaties and they've had giant conferences every year where everybody flies private jets to discuss how we're going to change fossil fuels. And they all work through subsidies and caps and cap and trade and net neutrality and all these different goals and things, and nothing has really changed. We've made certainly advances in solar and wind and batteries and EVs, but the energy needs of the world continue to spiral and AI. And my, my point is everything we've done has been utterly inadequate. And I guess I'm trying to figure out what are we misunderstanding about the solutions? And how can behavioral economics give us a better angle on it than the standard economics and the standard political realities which have failed us? How would you change the way.

[Richard Thaler]

Okay, good.

[Jon Stewart]

Yeah.

[Richard Thaler]

So what have we done? Almost, God, almost 20 years ago, I wrote a book with Cass Sunstein called Nudge.

[Jon Stewart]

Yes, I remember Nudge.

[Richard Thaler]

It was a book about how we can help in this kind of situation. And so here's one example. All right, we're in this world where gas Guzzling cars are too cheap and we all would like to put a tax on that, but we can't. Well, one thing we can do is we can put labels on the cars telling you how much it's going to cost you to operate this car. Well, that will help a little.

[Jon Stewart]

Right? Like, like a food. Labeling will help you with, with health. And if people see like, oh, this car is going to cost me $6,000 a year to buy gas for. This other car is going to cost me $3,000 a year to buy gas for, that's a piece of information that will help me make a decision. And that decision, we think will also be better for the environment.

[Richard Thaler]

Right.

[Jon Stewart]

And so, and so those are little things, nudges that move us in the right direction.

[Richard Thaler]

Right. Another example is you probably get a utility bill that I'm guessing you personally don't look at.

[Jon Stewart]

Oh, I look at it every day.

[Richard Thaler]

That tells you how much energy you use compared to your neighbors with a similar house.

[Jon Stewart]

Ooh, you're going with shame. Shame. You're going with economic benefit and then also shame and no.

[Richard Thaler]

And patting on the back.

[Jon Stewart]

Ah, right. Yeah.

[Richard Thaler]

If you've put in solar or a heat pump.

[Jon Stewart]

All right.

[Richard Thaler]

Oh, John, Most guys with McMansions, you're.

[Jon Stewart]

Understanding my neighborhood, sir, they would in no way. They'd be like, what are you, a pussy? What are you doing over there?

[Richard Thaler]

Okay. So in any case, my co author, Cass Sunstein was the so called regulation czar for President Obama for a while. And his job was to make sure all the regulations that were being passed did more good than bad.

[Jon Stewart]

A series of nudges that would incentivize people through a variety of psychological, some would say manipulations. But, but understanding that that could drive our economy incrementally to a more positive climate future. Let me ask you a question.

[Richard Thaler]

Yeah.

[Jon Stewart]

Are we in a nudge economy or should you write a book called Shove? Because, you know, it feels like the incentives and subsidy taxes are all inadequate to address the reality of people's behavior and the totality of what we face. Why aren't we redesigning the entire systems?

[Richard Thaler]

So Nudge has two sets of critics. Okay. One would you could think of as complete free market guys that's saying, go away, let markets do it.

[Jon Stewart]

Yeah, but they live in la la land. Yeah.

[Richard Thaler]

Then there are the others saying, come on, we have to tell people what to do. My next book should be called Shove.

[Jon Stewart]

Yes, let me. Yeah, but you go ahead and then I'll explain why I think I'm different than those Two, but go ahead.

[Richard Thaler]

There's at least one. One of my colleagues has written such a book, and I will point out to that person and you that if we're in that world, sometimes Trump is president. So if we want to design a system where the government just tells us what to do, as opposed to nudge us, wouldn't that be worse?

[Jon Stewart]

Well, first of all, the government tells us what to do all the time. I mean, any regulation and all those kinds of things. No, no, but you're, you know, you're.

[Richard Thaler]

You saying should shove. We should shove.

[Jon Stewart]

Let me explain what I'm saying.

[Richard Thaler]

All right, do it.

[Jon Stewart]

So when I say shove, I don't mean the government saying to people, you are not allowed to use this much electricity or you are not allowed to use this much gas. When I say shove, it means understanding what the 10,000 years of, you know, human endeavor and progress on this earth really means. We are a species that if shit's easier, we will do it that way. Like, the horse didn't go by the wayside of the car because you know of anything other than, like, wait a minute, I can get there in half the time and not have the smell of horseshit done. Like, we are incentivized to. You've given me a product that makes my life easier. We don't care where the electricity comes from. When I say shove, it's this. It's. Stop thinking incrementally about the subsidies and the thing people want, the convenience that modern life has provided them, whether they live in the Global south or whether they live in our thing. And shove means these incremental systems and with all its political peril and all those things aren't what's actually going to solve the problem. Shove means looking at mitigating the damage that human beings in all their greed and convenience, need. In other words, shove is not telling people what to do. It's getting scientists to help us clean up this mess, meaning carbon capture or other types of models. Because what you won't be able to do through a series of nudges is make people not want the most efficient, convenient, cheapest thing that they can possibly get. And anything that doesn't take that into account is naive. So I'm not suggesting a paternalistic government that decides, oh, my God, climate changes and we've got to be better people. And how do we incentivize everyone to be better people? I don't think. I mean, my view is you can't. You actually need to think completely differently and create a model that creates Robust markets in damage mitigation and carbon mitigation.

[Richard Thaler]

Right.

[Jon Stewart]

That's my, that's my position.

[Richard Thaler]

Okay. But what I would say is that position is identical to the one that you mocked.

[Producer Jillian Spear]

Whoa.

[Richard Thaler]

As the standard economic prescription, which is set the prices right. And then people will have all the incentive to invent the new technologies to solve it. If the, if the carbon prices are right, then people are going to pour all kinds of money.

[Jon Stewart]

That's only one way of doing it, though. That's setting the carbon price is not necessarily the only way to do it. The other way to do it is create a market for mitigation. That's what I'm saying. It's not just about carbon.

[Richard Thaler]

There will be a market for mitigation. But if, if it doesn't cost you much to emit carbon, then people won't buy it.

[Jon Stewart]

No, it's not that people will buy it. It's that you need, you need to create a market for profit, for, for companies, not people that, that. John, am I, am I nuts?

[Richard Thaler]

Yeah. Yeah. Yep.

[Jon Stewart]

You know what's interesting about the avocado, and I've never really thought about this, but when you cut it open, you get that perfect little scoop with the little indentation. Have you ever thought to yourself, I bet that's comfortable to sleep in? Almost looks like a body shape where you could just lie there. And that's the genius of our sponsors. Avocado Green Mattress. It is. They've taken the beauty of the, the restful beauty of the inside of an avocado and turned it into a mattress. It's not made of avocados. Obviously. That thing would spoil in God, 30 seconds. But it's called Avocado Green Mattress. They sell mattresses, pillows, solid wood furniture. What more do you need? And no pits. It's all made from materials designed to support healthier living and more restorative sleep. Made without the harmful chemicals. Can actual avocados say that? Probably not. They only use certified organic, non toxic materials. They even have sleep trials, you know, of up to a year to make sure you get the best mattress for you. Avocado Green Mattress it is. It's brilliant. Avocado dream of better. And now they're having a great sale on Mattresses. Go to avocadogreenmattress.com/TWC to get up to 15% off avocadogreenmattpress.com TWS for up to 15% off mattresses. Avocadogreenmattress dot com TWS. But then explain to me how Nudge is going to. You know everything we've been talked about is this isn't, this is an urgent crisis and all the nudging and subsidies and is only incrementally inching us to something. Meanwhile you have a whole global south that hasn't developed the progress at the pace that in the, the global north has. And now we're telling them you have to do it through these series of subsidies and, and, and markets. That seems unrealistic. It seems more realistic to go to Exxon or wherever they are and go. We'll give you a shit ton of money if you can figure out how to clean carbon out of our atmosphere.

[Richard Thaler]

Well, but we wouldn't have to go to them to do that if the prices were right.

[Jon Stewart]

But what I'm saying is if you, if you live in the reality of the world. Look at the yellow vest movement in Europe, like even Europe with their we're doing the right thing and we ride our bikes everywhere. When you, when you set the carbon price not to the market of supply and demand but, but to the idea of what would be best for the world, you make yourself politically untenable. And if, if, and, and that's. That's to me the largest problem.

[Richard Thaler]

We're in agreement. And the.

[Jon Stewart]

You just said I was out in the. Wait a minute.

[Richard Thaler]

No, we are in agreement. We. No, but John, you want, you want to have it both.

[Jon Stewart]

Professor, when are your office hours? Professor? I'm coming in there this grade C minus man.

[Richard Thaler]

You know what? I've given you office hours at 8am California time. This is the first time I've ever had office hours at 8 o' clock in the morning. John.

[Jon Stewart]

Sir. Point taken.

[Richard Thaler]

I have a long career.

[Jon Stewart]

Point taken.

[Richard Thaler]

Objection.

[Jon Stewart]

Sustained.

[Richard Thaler]

You know you have office hours anytime you want. But it's going to be starting at 10.

[Jon Stewart]

My time henceforth works better for me too.

[Richard Thaler]

So let me move to one direction.

[Jon Stewart]

Yes, yes, yes.

[Richard Thaler]

Gps.

[Jon Stewart]

Okay.

[Richard Thaler]

If you have to. I. You do leave home occasionally. I hear.

[Jon Stewart]

Pretty occasionally.

[Richard Thaler]

So yeah.

[Jon Stewart]

That's not. Not a ton.

[Richard Thaler]

Yeah. You know, pretty comfortable. Before we get off the topic of status quo bias.

[Jon Stewart]

Yes. Yes.

[Richard Thaler]

You know some people have called me the first clinical economist that I.

[Jon Stewart]

Because of the psychological aspect of what.

[Richard Thaler]

You do and I think there is some danger you suffer from status quo bias syndrome.

[Jon Stewart]

Oh, tell me more. You know I'm always up for having a new illness.

[Richard Thaler]

Yeah. Doesn't like leaving home.

[Jon Stewart]

Yeah. No questions asked there.

[Richard Thaler]

Starts every show with some left handed scribbling that looks sort of panic.

[Jon Stewart]

Oh by the Way, if anybody would see it, there is no artistry there. It is, you know, really?

[Richard Thaler]

Brittany and. And her team.

[Jon Stewart]

Yes. Have been our producers. Yeah.

[Richard Thaler]

Yeah. They. They tell me that there's a lot of status quo bias syndrome in our book.

[Jon Stewart]

Inertia. There's a lot of inertia.

[Richard Thaler]

Yeah, yeah, I got you. I got you. I would add, continuing to root for the Mets for Sir.

[Jon Stewart]

Yeah. No, if you're saying that I somehow seem to be in love with the type of pain. Yeah. Masochism runs in my family.

[Richard Thaler]

I'm gonna get in a lot of trouble for the following statement, and then I will move on.

[Jon Stewart]

Yes, please.

[Richard Thaler]

I don't think there's anything wrong with firing your team.

[Jon Stewart]

Oh, sir, you're treading on very dangerous ground right now.

[Richard Thaler]

Also grew up in New Jersey.

[Jon Stewart]

This type of heresy, Sir. Galileo. Galileo was killed for less, sir.

[Richard Thaler]

Yes, I know, I know. We could both. We may not want to air this episode, you know, but. Because I think we both could get burned at the stage.

[Jon Stewart]

Not at all. Not at all.

[Richard Thaler]

But I grew up in North Jersey, but. So I grew up a Yankees fan.

[Jon Stewart]

Yes.

[Richard Thaler]

In the Mantle and Maris glory years.

[Jon Stewart]

Sure.

[Richard Thaler]

And then I grew to hate George Steinbrenner. And in my class on managerial decision making, I had one of my rules. Don't be like George Steinbrenner.

[Jon Stewart]

Fair enough.

[Richard Thaler]

Okay.

[Jon Stewart]

You're saying don't go to jail for any violations of certain shipping rules, or.

[Richard Thaler]

Is that don't hire and fire the same manager three times.

[Jon Stewart]

Okay, but George Steinbrenner did win championships.

[Richard Thaler]

He did, but not in a way that you enjoyed or I approved of.

[Jon Stewart]

Okay.

[Richard Thaler]

And so I fired the Yankees.

[Jon Stewart]

All right.

[Richard Thaler]

And I'm just saying you should, you know.

[Jon Stewart]

Yes, but after you fired the Yankees, they apparently still had a job. So what I'm saying is that firing has no impact.

[Richard Thaler]

Look, my son suffers from this. When. When he was a kid, he fell in love with the Dolphins.

[Jon Stewart]

Great, great uniform. Dan Marino. I'm assuming that was the Dan Marino era.

[Richard Thaler]

Great uniform. His wife and two daughters.

[Jon Stewart]

Yeah.

[Richard Thaler]

You know, they live in San Francisco. They all adopted the Niners and. But they have to put up with that. Turquoise and orange.

[Jon Stewart]

Yeah, yeah.

[Richard Thaler]

You know, the cost sees imposed.

[Jon Stewart]

So is the point you're making here, if I may, is the point you're making that I am not giving humankind enough credit for an ability to adapt to understanding that the long term harms, that our short term actions are taking are damaging us? And that if I'm just nudging them enough, we will Understand that long term, that the short term pleasure is not worth the long term harm.

[Richard Thaler]

No, I mean what I was just doing is giving you a little shit. But let's, let, let's, let's get back to climate change.

[Jon Stewart]

Yeah.

[Richard Thaler]

GPS is my favorite kind of nudge. And I have geographical. I'm sort of geographically dyslexic and GPS has saved me. I can wander around in a strange city and find my way back to my hotel all by myself. Normally I need my wife.

[Jon Stewart]

You're a big boy.

[Richard Thaler]

By the hand. Yes, now. And my motto, my mantra is design policies, make it easy. Yes, that's my mantra, make it easy.

[Jon Stewart]

You and I are agreeing and you can't tell people to go back to paper maps because. So let's say we found out that GPS emits something through the towers that they use in the satellites that is heating the environment. Nudging people back to maps isn't going to work. And so what I'm saying is you have to create shoves that create new avenues and new incentives that allow people to still enjoy the benefits of that progress while mitigating the, the day you have to, you have to look at it.

[Richard Thaler]

Nobody's required to use gps.

[Jon Stewart]

But it's better.

[Richard Thaler]

It's exactly right.

[Jon Stewart]

That's my point. And oil. And like energy is better. People need energy. And a lot of the suggestions from governments is let's use less. Okay.

[Richard Thaler]

So bear with me. John. Yeah, please, let's switch to a different problem.

[Jon Stewart]

Let's do aca, let's do health care, because that's another one that I think in terms of its incentives and subsidies. But it's nudging a broken system when.

[Richard Thaler]

We shift by way of retirement saving. Because I. Yes, okay. Because that's one. We did a little thing. All right, so one of the problems economists ignore is that people have self control problems. You know, we're fat, we drink too much, we don't save enough.

[Jon Stewart]

Dark vision.

[Richard Thaler]

We, you know, look around, open your eyes.

[Jon Stewart]

Social Security was kind of a way to mitigate that, no?

[Richard Thaler]

Yeah, but it's, it works pretty well for one segment, which is people who have regular low paying jobs. The replacement rate is kind of okay, but if you're in and out, not so much. And for the upper middle class, Social Security isn't enough really to live on. And we used to have these old fashioned defined benefit pension plans that guaranteed you an annuity depending on how much you made and how long you worked. And they got replaced with these 401k things.

[Jon Stewart]

Right. And Those pensions were generally matched by employers and they were part of the responsibility and compensation package that you would get from the old world of you went to work at a factory and you left it 45 years later.

[Richard Thaler]

Right. And you just, you had no decisions to make. And with the new 401k, you had to join and decide how much to save and how to invest. And that was hard. And a lot of people in the early days of these didn't even join and the company was matching their contributions. It's the dumbest thing. It's turning down free money. So how did we, I'm not going to say fix this, but improve it. One thing we did was, we said it used to be if you wanted to be in the 401k, you had to fill out a form. We said, okay, let's change the default. People are good at doing nothing.

[Jon Stewart]

So we, we're not a fan of people, sir.

[Richard Thaler]

We go back, rewind the tape to the diagnosis of John.

[Jon Stewart]

Yes.

[Richard Thaler]

Okay, so you got. Now get, yeah, you, you now get a message saying, welcome to our firm. We're going to enroll you in the 401k plan unless you fill out this form.

[Jon Stewart]

Right, Right. So. So you made it so that the opt out took an action, whereas the opt in did not take an action, therefore incentivizing the opt in, which is the better outcome for people in terms of money.

[Richard Thaler]

Right. And, and incentivizing cost just by changing the box. Right. So again, what do regular economists would assume? It doesn't matter what box is ticked.

[Jon Stewart]

Would they really? Like, they don't. Regular economists don't take into account pain in the ass like that level of it.

[Richard Thaler]

They would say the cost of ticking a box versus 6% of your salary.

[Jon Stewart]

I mean, really, here's what I would say. Businesses understand that that's why your credit card bill is unintelligible. Like when you read all that fine print, you have no idea what you're reading. And that's purpose obfuscation. It's purposeful. They understand that people aren't going to wade through that. They're not going to understand that. Wait a minute, after six months, this goes up to 21%. They understand how to manipulate us all the time.

[Richard Thaler]

Absolutely. All right, we are exactly on the same page.

[Jon Stewart]

Yes. The system is designed to exploit us and people don't have an ability to understand that because of the way that the system is allowed to be designed.

[Richard Thaler]

Right. And look, making it opt out is good for people. And we improved pension plans just by switching which boxes Ticked.

[Jon Stewart]

No, that's. That sounds like a very smart move.

[Richard Thaler]

But of course, companies learn the same trick. Not from us.

[Jon Stewart]

Or at least I'm not taking the reverse engineering. Of course, Nabisco makes chips that they design them so that they're almost impossible not to eat. You, you get fat, and then big pharma makes GLP1s and that makes it so that you control your appetite. So then Nabisco has to engineer that to get past. I mean, this is the cycle of exploitation. And I mean, that's. Again, that gets back to the incentive here is greed. It's. That's what, that's what we're doing. And that's why I'm saying nudges sometimes are inadequate and shoves. Yeah, Okay.

[Richard Thaler]

I totally agree. So far, the only thing we disagree about.

[Jon Stewart]

Mets. The Mets.

[Richard Thaler]

Yeah.

[Jon Stewart]

Okay.

[Richard Thaler]

The two things we disagree about.

[Jon Stewart]

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[Richard Thaler]

The two things we disagree about are. The Mets. Yeah. And whether getting the prices right would be sufficient.

[Jon Stewart]

So let's look at the aca, because the whole idea there is if we create a market for insurance, we'll get the prices right and we'll subsidize for the people who can't. Because to get the market to be efficient, we need everybody to be in it. And to get the insurance companies to allow everybody to be in it, we're going to have to make sure that we subsidize them because the markets include people with pre existing conditions or people who are not healthy. And the insurance companies don't want to deal with that. So we do little nudges about. You can check this box because it's a very complicated market. And I look at that and think we are papering over a broken system with nudges when we have to shove ourselves into what makes the most sense for health care, which is. Which every other developed country in the world has already realized, which is free market incentives don't work in a system with those kinds of externalities. Health care is not, Will never be a functioning market. And the system is designed to exploit people's need to not die. And by creating the ACA and all those other things, we're papering over what should be the reality of the system, which is centralizing it is the only way to create something that will efficiently help people not die. That, that's, that's where I would crystallize my argument in, in all of this.

[Richard Thaler]

Right. And. And obviously we're going to have no listeners left if we, if we.

[Jon Stewart]

Who we don't have. Yeah, all right.

[Richard Thaler]

Yeah. If we go all the way down that path, here's what I will say. I was actually in the White House while the catastrophic website that was being designed for aca, which crashed on the opening day. Somebody was designing that. And I was talking to somebody, I said, could wait, you were in the.

[Jon Stewart]

White House while that was going on?

[Richard Thaler]

While they were not. While it was crashing before that, when somebody was designing it. And I said, oh, can I go talk to that guy? And they, oh yeah, go, go see that guy. And they show me some screenshots. And so here's what in a behavioral economist thinks about. Somebody had decided that the plans should be grouped into categories. And the categories should get labels of metals like platinum, gold, silver, bronze, sell like timeshares. And so I said, why? Why should we do this? And I never got an answer what the theory was for why.

[Jon Stewart]

I think the theory is like credit cards. Like, you get a platinum, you get a black card, you get a. You know, one is basic, one is got some frills, the other is free drinks and food.

[Richard Thaler]

But then down at the bottom there was another category and it didn't get a medal. It was called catastrophic. I said, wait a minute. So a catastrophic policy is one with a high deductible.

[Jon Stewart]

It only helps you if you really. If the shit hits the fan.

[Richard Thaler]

Yeah. But economists, a lot of economists would say that's probably the most efficient policy. But my comment to these guys was wait, you're not calling one of the brands catastrophic? Right. We've got platinum, gold, bronze, catastrophic. And they say, yeah, well that's what economists call those plans.

[Jon Stewart]

But my comment would be catastrophic is how I would categorize the choice to treat health care. Like it's a product that companies like health insurers haven't already figured out how to exploit for maximum profit to the detriment of people who. We always know people don't shop around for health care. Making it more transparent doesn't mean they'll shop around. They want to live. They want to go to the best doctor that they can who is nearest to them, especially in an emergency. They don't get a choice. And for us to continue to treat this as though it is some functioning market that we can do our usual games of subsidies and labeling to fix that. My point is that's a market that needs a shove.

[Richard Thaler]

Yeah. Okay, so I'm going to make two points.

[Jon Stewart]

Yeah.

[Richard Thaler]

One is some friends of mine and I ran a quick little experiment simply changing the name of the catastrophic policy to economy or value. In our experiments reduced the number of uninsured by 10%.

[Jon Stewart]

Right.

[Richard Thaler]

That was good. It's better. No, no, no, no.

[Jon Stewart]

I'm not saying there isn't goods to be had okay. Through that.

[Richard Thaler]

But if. All right, that's point one.

[Jon Stewart]

Let me say this. Are there still people who go bankrupt because they get sick? Have we fixed the problem? No, we have people that, that.

[Richard Thaler]

Okay. All right. So here, here's my.

[Jon Stewart]

Don't let, don't let perfect be the enemy of good is the point.

[Richard Thaler]

Yes. And if we're striving for perfect, you're absolutely right, John. There are vested interests, the hospitals, the insurance companies, the doctors that don't want nurses to be able to do a lot of stuff. And pharmacists are the most over trained people in the economy because they end up working in some God awful Walgreens or. Right.

[Jon Stewart]

Meanwhile, it's the benefit managers that are making all the money because they're the middlemen setting the prices.

[Richard Thaler]

Right.

[Jon Stewart]

If we. But if we allow ourselves to be satisfied by these incremental positives and not let perfect be the enemy of good. Don't we lose sight of. Don't let insane be the enemy of. Of sane or don't let sane be the enemy of insane. Like if we have a system that is like blatantly insane, aren't we? Yes. You make all these improvements. I'm not suggesting that there will ever be anything that's perfect, but if we continue to accept such a broken and corrupted system as our only option is incremental improvements within that. Aren't. Aren't economists and policymakers and everyone else robbing us of an opportunity? Because sometimes you need to, To. To view it on. Not to go with the other terms of economics, but the macro, not the micro.

[Richard Thaler]

Right. So what I would say is, you know, Mark Cuban has a little company that.

[Jon Stewart]

Sure, it's very smart.

[Richard Thaler]

Very smart.

[Jon Stewart]

But why does the government do that?

[Richard Thaler]

Well, because all of the vested interests.

[Jon Stewart]

But that's my. Okay, well, but that's my point.

[Richard Thaler]

Okay, but look, suppose you say Medicare for all.

[Jon Stewart]

Medicare for all that want it. Yes. Great.

[Richard Thaler]

Right. So language matters.

[Jon Stewart]

Sure. And having a system that people can buy into, anybody that wants to join a system so that you remove the possibility of going bankrupt because you get sick, to me, is like the baseline of a healthy society.

[Richard Thaler]

Well, so I would go further. My plan would be. If we're going to start with something, I wouldn't start with that.

[Jon Stewart]

Okay.

[Richard Thaler]

I would start with catastrophic insurance for free for everyone.

[Jon Stewart]

Okay, now we're getting somewhere. That's what I'm a behavioral economist. I'm with you, baby.

[Richard Thaler]

All right. You've graduated.

[Jon Stewart]

Let's go, Mats.

[Richard Thaler]

He was so close. He was almost there, you know, so, you know, we can't. We can't ignore all the vested interests.

[Jon Stewart]

No, but they're the ones we should be nudging and shoving, not consumers. I think we're always shoving on the wrong end of the horse.

[Richard Thaler]

Well, but the problem is that there's. All those vested interests have lots of money.

[Jon Stewart]

Right.

[Richard Thaler]

And they support both parties, and they. They will make it difficult, but that's.

[Jon Stewart]

The job of, of governance, I would say. Here's what I would love for economists and behavioral economists, I think could play a big part in this, is to help us understand that the founders looked at the system and said, there's going to be a balance, a power, checks and balances, between the executive and the judiciary and the legislative. But there's another power, and that's corporate power. And it's really the fourth branch of government and maybe one of the most influential branches. And the only thing that we have in this country that is powerful enough to in any way mitigate that is the government. And if the government refuses to take a courageous stand in mitigating that damage, the damage of green. You know, I remember Alan Greenspan was on my show in, like, 2008. 2009.

[Richard Thaler]

That must have been exciting.

[Jon Stewart]

Oh, it was. He was only at that time, I think he was 9. He was 98. He might have been 103 at that time. And I asked him, you know, the financial crisis 2008, like, what the hell happened? And he goes, I think we overestimated the bank's ability to regulate themselves.

[Richard Thaler]

Yeah.

[Jon Stewart]

And I was like, do you mean you were idiots? Because that's insane.

[Richard Thaler]

Well, you know, but we, look, we, we. The Fed. The Fed is probably the, you could argue the best functioning branch of the government. And certainly you can argue it's got the best, at least right now, best trained people working for them. And it's a well functioning branch of the government. And, you know, that may all change.

[Jon Stewart]

I think, I think, I believe the plan is already in place to knock down the east wing of the Fed. And listen, you know, our, our we.

[Richard Thaler]

Have a mutual friend, Austan Goolsbee. I love the Goolsbee, you know, and he's the president of the Chicago Fed. Come on.

[Jon Stewart]

I love Goolsby. Yeah, tell him I said hello. Tell him to come on this show. Well, right now he's in the Fed. He's not allowed to talk much.

[Richard Thaler]

Yeah.

[Jon Stewart]

And anyway, it's tough on him. He's funny, you know, he's actually really funny.

[Richard Thaler]

No, he's very funny.

[Jon Stewart]

Yeah, no, I like Goldsby.

[Richard Thaler]

So where were we?

[Jon Stewart]

We were tearing down the fabric of capitalist institutions and reforming them.

[Richard Thaler]

The problem is we wouldn't know where to start. And there's just. If Mark Cuban can't do it, I don't know just any one step. So like my version of free catastrophic for all, I think is a good place to start, but it wouldn't eliminate the power of the American Medical association to limit what physicians assistants can do. And the insurance companies, and I understand all the benefit managers and all the layers. It's above my pay grade to think about it.

[Jon Stewart]

I understand. And you know what? It's a great place, I think. And I've so appreciated your time and your office hours. You've been so generous with them. And, you know, I was taking this thing pass fail anyway. So the idea that you gave me all this time.

[Richard Thaler]

No, no, I don't allow pass fail.

[Jon Stewart]

What?

[Richard Thaler]

No, no, I am.

[Jon Stewart]

I'm not going near you, man.

[Richard Thaler]

But you know, there's grade non disclosure.

[Jon Stewart]

That's where I'm at.

[Richard Thaler]

So let's do that.

[Jon Stewart]

Let's do that.

[Richard Thaler]

Yeah. Okay.

[Jon Stewart]

But I think the point that I think maybe I love coming to is this. I love the idea of those really smart incentivized nudges and those things, but not allowing that to remove our higher aspiration of actually looking at the logistics and the guts of something and, and, and, and getting systems that are not as exploitative that, you know, government has to have a larger role in mitigating the damage. Look, capitalism is the operating system we have.

[Richard Thaler]

Yep.

[Jon Stewart]

But it's clearly not a free market. It's intervened in by governments and all kinds of other corrupt actors and the crony capitalism that goes along with it. And my point is, let's continue to do those really smart things that you're talking about, but we cannot lose sight of the larger goal, which is to. That a government has to be there to help mitigate the collateral damage that the operating system we've chosen to use often creates.

[Richard Thaler]

Yeah. And we need, we need another show, John, to figure out how, how to get there.

[Jon Stewart]

Oh, but we will. We, we can. Yes, we. The audacity of hope, baby.

[Richard Thaler]

Yeah. Yeah.

[Jon Stewart]

You're a good man, Professor. Thank you for, for joining us. Professor Richard Thaler, University of Chicago and one of the founding fathers of behavioral economics. The 2017 Nobel Prize in econ, which is sitting on Donald Trump's fireplace mantle.

[Richard Thaler]

As we speak, but is up for sale. Up for sale. Up for sale for the highest bid.

[Jon Stewart]

You know what? And, and you can get that and a Cornell mug, I'm assuming for just seven. $7 more or a nudge mug.

[Richard Thaler]

There you go.

[Jon Stewart]

Excellent product placement. Thank you so much, Professor.

[Richard Thaler]

Thank you, John. Pleasure to meet you.

[Jon Stewart]

Pleasure to meet you too. Hey, folks, it's Quint's time. Today's sponsor, Quints, helps you forget about all the fashion nightmares. Quince. They bring together the premium materials, the thoughtful design, the quality. You stay warm, you look sharp, you feel your best. Each piece made from premium materials by trusted factories that meet rigorous standards for craftsmanship and ethical production. But they cut out the middleman. I don't like middlemen. Do you like middlemen? Maybe you're a middleman. Maybe you do like middlemen, but you cut out the middlemen and you cut out their traditional markups. Quince delivers the same quality as these luxury brands at a fraction of the price. Refresh your winter wardrobe with quint. Go to quint.com TWS for free shipping on your order and a 365 day returns now available in Canada too. That's Quint. Q U I n c e.com TWS free shipping and 365 day returns. Quint.com TWS. Man. My favorite part of the interview, if I may.

[Producer Brittany Mamedovic]

Yes.

[Jon Stewart]

Was how slowly he talked to try. And I really felt like it was, I think he was about like 10 minutes into it when he was like, I'm gonna have to change my tact here because little brain is not.

[Richard Thaler]

No.

[Producer Jillian Spear or another producer]

Yeah.

[Producer Jillian Spear]

I don't think he was expecting that conversation.

[Producer Jillian Spear or another producer]

My favorite part was when he psychoanalyzed you. I think that was the first time that's happened on the pod.

[Jon Stewart]

That is right. I gotta tell you though, he kind of nailed it.

[Producer Jillian Spear or another producer]

I mean, they don't give out Nobel Prizes for nothing, you know.

[Jon Stewart]

No, I thought he, I, I, I thought he did an excellent job. Did any of that resonate, though, with you guys? I think I, I get where he's coming from with that idea of, like, don't let perfect be the enemy of good. But I don't know that they, if it's not to suggest that incrementalism isn't still a part of the equation. Of course, but I don't know the general frustration within the public.

[Producer Jillian Spear or another producer]

100%.

[Producer Jillian Spear]

I thought it was incredibly illuminating that a conversation about health care, his grievance, or what his brain went to was the categorization of shitty plants. Like, not having those categories explaining in really big print exactly what these plants do does not mean they don't all suck. Still.

[Richard Thaler]

Yeah.

[Producer Jillian Spear or another producer]

I think it's like, so if economists argue that you should choose the catastrophic plan because that would be optimal, and then behavioral economists argue we need to change the name because people aren't choosing the most optimal plan, then we need to find someone that will argue that the problem is actually that the most optimal plan is a plan that you will go broke if you need to use. That's the real problem here.

[Jon Stewart]

That was trying to explain, like, aren't you just like polishing turds at that point? But I, I mean, I, I get his point that there is like, you, you did help some people. But I think sometimes that gives you license to ignore the larger totality of climate change, health care, of, by, by, by incrementalizing. You also are forgetting that you al, you have to maximalize as well, big structural change. Thank you.

[Producer Jillian Spear]

Well, I was thinking a little bit when you were bringing up the subsidy is that's a shove, right? And if we just think about the subsidy itself, this, the shove is even small in comparison to what we should be doing. We take away the subsidy, 1.5 million people drop out of the ACA marketplace. Those are the people who are young, who are holding up the system. For like, the 5% of people were really using it. But the whole thing's going to start crumbling because of this shove that was supposed to be a fix, which it's not.

[Jon Stewart]

That's right. I mean, I, I almost think he would still categorize subsidy as like a nudge and the shove would be the redesign of it, but they don't. Boy, I thought he got really, like, that was where he was, like, uncomfortable. Like, you can't just, you know, you can't bring your weight on insurance companies. That's not right.

[Producer Brittany Mamedovic]

His pauses got longer in those moments.

[Jon Stewart]

He just got sad. That's when he went to like, you're a Mets fan, aren't you? But anyway, it was very interesting, very, very illuminating, I think, for me. What about Brittany? What do we got for the listeners there? What do they got there? What do they want?

[Producer Brittany Mamedovic]

Alrighty. First up, we've got John. Of all the Trump news this week, which development worried you the most?

[Jon Stewart]

Oh, I think the election, you know, with all the. The elites are going to get out of everything. I'm sort of accustomed to, as we said on the show last night, the real sanctuary city in this country, which is this privileged class that there is no crime they can commit that would have any kind of accountability to it. But it was the, the, the raid on the Fulton county electoral board, along with his offhand remark about nationalizing the election only in, I think, the 15 states that caused him a problem.

[Producer Jillian Spear or another producer]

I'm just spitballing here, but what if we nationalize the elections in the 15 states that caused me a problem.

[Jon Stewart]

Right?

[Producer Jillian Spear or another producer]

Yeah.

[Jon Stewart]

I mean, he's going to end up tariffing states to get them.

[Producer Jillian Spear]

And this was like a small related situation, but he actually called Tulsi Gabbard after assigning her that mission. Trump was just on the phone with.

[Jon Stewart]

Her while he's even assigning her. Anyway, what the fuck is the President assigning the DNI to an FBI? He's not supposed to be assigning the FBI to stuff. They're supposed to be independent.

[Producer Jillian Spear]

And she's also under some top secret investigation while this is all going on. The whole thing's a mess. But I agree with you.

[Jon Stewart]

What? What? Do you know what the investigation is? What?

[Producer Jillian Spear]

No, no, it's top secret. It's like locked away so that even Congress doesn't know because they don't want it to get out.

[Producer Brittany Mamedovic]

It's in a safe, literally.

[Jon Stewart]

I bet it's about the streak. The streak in the hair.

[Producer Jillian Spear]

No one knows people's graves.

[Jon Stewart]

No, no, no, no. No, no, no. It's the streak. People are going to say, what is that? What is. That's. Clearly, she's giving a sign to somebody.

[Producer Jillian Spear]

Hold our secrets in that.

[Jon Stewart]

Is it Putin?

[Producer Jillian Spear or another producer]

Yeah.

[Jon Stewart]

Is that. Who would. Yeah, No, I agree with you. That's. And, and, and the problem is you don't ever think there'll be no accountability for any of them in the first place anyway. So they're operating under, as they would say, as J.D. vance would say, absolute immunity, which is a fucking ridiculousness. What else. What else do they want? What else do these viewers. Listeners. Yeah.

[Producer Brittany Mamedovic]

Why can Trump threaten to sue everyone for a gazillion dollars, but no one can sue him back?

[Jon Stewart]

That is a Zen Cohen.

[Richard Thaler]

That is.

[Jon Stewart]

I, I think I might have. That. That was a. I believe that might have been a fortune cookie that I got the other day. That's one of those. The Buddhists will go to a monastery and they will sit there in silence for years pondering the question of why Trump. Now, to be fair, no one has been sued more than Donald Trump in my estimate. Like, if you go through his construction records, every fucking contractor he's ever worked with is like, hey, man, you still owe me 15% of the money. And he's like, come and get me.

[Producer Brittany Mamedovic]

Try it.

[Producer Jillian Spear or another producer]

He's a victim. Yeah.

[Jon Stewart]

Poor, poor, sweet billionaire president.

[Producer Jillian Spear]

Oh, there have been some recent suits, but I think that, I mean, he's making so much money off the presidency, probably go on forever, whereas people can't afford to continue these suits.

[Jon Stewart]

Oh, they've got. I mean, the Supreme Court made it basically so that, like, he kind of, no matter what he does, you know, is sort of in the guise of his presidential duties, you're not even allowed to do discovery. I think part of why you can't sue him is like, I'm suing you. Great. What evidence do you have? Well, I'd like to see your emails. Boy, I'd love to, but I don't, I don't have to. But his, you know, it's interesting. The, the, the mindset that he had, as you know, running Trump Enterprises is the same as he has when it comes to be president. It's the exploitation he did, like, on all of his contractors, everybody. People don't realize, like, so many contractors in New York City. Fucking hate that guy. Because his, his whole strategy was, I'll pay you just enough money to satisfy a certain portion of the contract, but I won't pay you the final 10 or 15% knowing that you, as a small contractor, the hassle and money it will take you to try and recoup, that won't be worth it. And so I will get myself 10 to 15% off of everything that I do.

[Producer Jillian Spear or another producer]

That's behavioral economics, right?

[Jon Stewart]

Jillian, spear together.

[Richard Thaler]

One more.

[Jon Stewart]

One more question.

[Producer Brittany Mamedovic]

All righty. All right, John, which Super bowl halftime show will you be watching? Bad Bunny or Kid Rock?

[Producer Jillian Spear or another producer]

Puppy bowl that there's already counter programming? If only usa?

[Jon Stewart]

No, I always watch the super bowl halftime show. I don't particularly care who's on it. A. It's a continuity issue. Behavioral economics, status quo thinking.

[Producer Brittany Mamedovic]

Nice inertia.

[Jon Stewart]

I feel bad for, like, I feel bad. Not bad, but, I mean, he's a superstar, but Bad Bunny, like, the. This guy's take, he reaches the pinnacle of his professional career and a kind of global superstar to get the opportunity to do a halftime show. The guy's clearly a extraordinary musician and entertainer who's earned this place. And the idea that he's facing a backlash. My favorite backlash to it is, you know, he's, you got to get a American in there. And you're like, yeah, read a fucking book, right?

[Producer Jillian Spear]

Aye yai yai.

[Jon Stewart]

The Jillian sigh tells us all we need to know.

[Producer Jillian Spear or another producer]

It drives me crazy. I love Bad Bunny. Like, oh, he's gonna kill it. I can't wait, Benito. That's why I'm tuning in. The game's gonna be a blowout.

[Producer Brittany Mamedovic]

He's wonderful. He just won two grand. Three Grammys Sunday night.

[Richard Thaler]

Right.

[Producer Brittany Mamedovic]

Plus, he's really hot, so.

[Producer Jillian Spear or another producer]

Really, he has Kid Rock beat in that element for sure.

[Producer Jillian Spear]

Yeah.

[Jon Stewart]

Wait, so the Bad Bunny also has a little bit of a machismo, a little bit of a vibe going.

[Producer Brittany Mamedovic]

Oh, yeah, interesting.

[Jon Stewart]

You know, but to be a musician versus a comedian, you know, this. This comedian is never done about comedians. It's always musicians. People love the. It's something with the. The hips not lying. Well, listen, very, very lovely, guys. Thank you once again, Brittany. How do they. How do they stay in touch with us for all this?

[Producer Jillian Spear or another producer]

Twitter.

[Producer Brittany Mamedovic]

We are weekly show pod. Instagram threads. TikTok, blue sky. We are weekly show podcast. And you can, like, subscribe and comment on our YouTube channel, the weekly show.

[Jon Stewart]

With Jon Stewart and Instagram, baby. If you want to see all of my nasal pores, join me on my page. Thank you guys so much. Lead producer Lauren Walker. Producer Brittany Mamedovic. Producer Jillian Spear. Video editor and engineer Robertola. Audio editor and engineer Nicole Boyce. Executive producers Chris McShane and Katie Gray. We will see you guys next time. The weekly show with Jon Stewart. Is a Comedy Central podcast. It's produced by Paramount Audio and Busboy Productions.

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