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The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

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Chapter 10: Dick Thaler Gives Economic Man a Personality

Human nature begins to find its way back into economics in the 1970s, and economists begin to study how markets sometimes fail.

The only point Daniel Kahneman was trying to get across was that praise works better than punishment. The Israeli Air Force flight instructors to whom the Hebrew University psychology professor delivered his speech that day in Jerusalem in the mid-1960s were dubious. One veteran instructor retorted:

On many occasions I have praised flight cadets for clean execution of some aerobatic maneuver, and in general when they try it again, they do worse. On the other hand, I have often screamed at cadets for bad execution, and in general they do better the next time. ...

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