Human Nature: The X Factor in Economic Theory

Irrationality plays a part in economic behavior. For example, people who took on too much mortgage debt helped cause the housing collapse

According to Dan Ariely, author of the recently released book Predictably Irrational and the James B. Duke Professor of Behavioral Economics at Duke University, behavioral economics is an important and useful tool for society because it takes into account the irrationality of human nature. I loved this book—and highly recommend it. I've asked Dan to give us his take from a behavioral economics perspective on the current economic situation. Edited excerpts of our conversation follow:

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