How Economics Can Stop Us Making Stupid Choices

November 24, 2025·39 min·3 clips

Richard Thaler reveals how exploiting human laziness transformed UK pension saving with auto-enrollment.

Steph is away, so Robert Peston sits down with Richard Thaler for a focused conversation about behavioural economics, choice, and the strange places those ideas end up. Peston credits Thaler with changing economic thinking and influencing public policy, but the episode does not stay in tribute mode for long. It begins with Thaler's new book, The Winner's Curse, a collection of essays written over time and updated, then moves into a harder problem. What happens when tools meant to help citizens make better choices meet social networks, commercial incentives, and AI? Thaler does not make it neat. He talks about environments built so people want to return even when they are almost certain to lose money, then draws the parallel with social networks giving people what they want even when the result makes them unhappy. Peston puts the tension sharply. If algorithms are already tearing people apart, the old worry about paternalism starts to look smaller next to private systems that shape attention every day. Thaler's answer starts with auditability. He is not arguing that companies should hand Facebook's methods to Twitter, but he does think regulators need a way to test what platforms are doing and how much manipulation is involved. Then comes the awkward part: capacity. AI makes the power of these systems grow fast, while regulators struggle to hire the kind of people companies can afford. Peston presses on whether governments can really stand up to companies with that much money behind them. Thaler stays with the economics. He still believes in markets, but markets need visible conditions for choice to mean anything. That condition is wobbling. The conversation lands on a marketplace problem, not a sermon: social media has money because people keep looking at phones, even when it may be making them miserable. Thaler's final point is blunt. To understand the economy, you have to understand human psychology, including the parts markets learn to use.

As heard by us

Behavioural economics, algorithms, and regulation meet in a sharp conversation about choice.

Richard Thaler takes a familiar behavioral economics conversation and gives it more bite. The focus is not just on prices and incentives, but on the systems that nudge attention, steer choices, and shape what people do.

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Why you'd press play

If you want economics that explains why your choices keep getting steered, start here.

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