Why economic models fail

Chicago Booth's Stigler Center's podcast Capitalisn't is devoted to analysing capitalism, how it functions in contemporary society, and how it is subverted. In Nobel Economist Reveals Why Economic Models Keep Failing Us, hosts economist Luigi Zingales and journalist Bethany McLean talk to Richard H Thaler, a Chicago Booth professor and Nobel Prize-winning economist, about his new book, The Winner's Curse: Behavioral Economics Anomalies, Then and Now, coauthored with Alex Imas.

In the discussion, Thaler reflects on three decades of research showing how real human behaviour systematically departs from the rational, self-interested agents assumed in traditional models. He connects enduring behavioural 'anomalies' - such as overconfidence and limited self-control - to contemporary problems, including financial crises and social media addiction.

Thaler traces how behavioural economics moved from the margins to the mainstream, discusses practical policy implications, and candidly rejects the idea of a single grand theory of human irrationality. The result is a thoughtful, engaging episode that underscores why economics must grapple seriously with how people actually behave - not how models wish they would.