Dear Richard (Posner), Love Richard (Thaler)

There is a nice note from behavioral economist Richard Thaler to law & economics sort Richard Posner out. The former takes the latter to task for his WSJ OpEd criticizing his support of a Consumer Financial Protection Agency.

Here is a key paragraph:

Posner does not stop at mischaracterizing the proposal. He launches a second line of attack based on the following logic. 1) Behavioral economists such as Thaler have endorsed this plan. 2) Thaler has been known to make mistakes. 3) Therefore, he should not be in the business of helping consumers avoid mistakes. Of all the evidence readily available that I am not perfect, he concentrates on the fact that I have written about the well-known puzzle in economics that the difference in returns between equities and bonds (the "equity premium") has, in the past, seemed to be too large. With the market now down, presumably he thinks this writing makes me look foolish. I plead guilty to joining the hundreds of other economists (most of whom are not behavioral economists) who have written about this historical puzzle. And, as Posner suggests, for many years I did advocate that young investors should consider putting all their money in stocks, and I followed that advice myself until 2000 when the level of the stock market bubble got so ridiculously high that I switched half of my retirement portfolio into treasury inflation-protected bonds (TIPS). But of course, I am not a perfect forecaster. I, like most people, did not get out of stocks last summer. And, I certainly plead guilty to being imperfect. For a long list of particulars, contact my wife.

Read the whole thing.


As a related aside, the introductory comments to Thaler’s entry quotes one of my favorite essays about Posner’s awesome output:

The literary output of Richard A. Posner is staggering.  As a wonder of the world, it ranks with the pyramids and the hanging gardens of Babylon.  As far as I can determine, he has authored, co-authored, or edited about forty books and four hundred learned articles,1 many, if
not most, generated while serving as Chief Judge of the Seventh Circuit Court of Appeals and senior lecturer at the University of Chicago Law School, where he is currently delivering courses in antitrust, evidence, and legal pragmatics.  How does he do it?  Where does he find the time?
Nobel Laureate and fellow Chicago economist Ronald Coase was asked his opinion of Posner’s scholarship: “I don’t know.  He writes faster than I can read.”


  1. Posner is a subtle thinker – read his blog. Thaler is the crashing boor, and thin-skinned as his response shows.