The Irrational Economy with Nobel Laureate Richard Thaler | The Weekly Show with Jon Stewart

JON STEWART: We are papering over a broken system. with nudges when we have to shove ourselves into what makes. the most sense for health care, which is-- which. every other developed country in the world. has already realized, which is free market. incentives don't work in a system with those kinds. of externalities. Health care is not-- will never be a functioning market. And the system is designed to exploit. people's need to not die.

And by creating the ACA and all those other things, we're papering over what should be the reality of the system, which is centralizing it is the only way. to create something that will efficiently help people. not die. That's where I would crystallize. my argument in all of this. RICHARD THALER: Right. And obviously, we're going to have no listeners left if we--.

JON STEWART: Who-- we don't have--. [MUSIC PLAYING]. Hey, everybody. Welcome, once again, to The Weekly Show. podcast with Jon Stewart. My name is Jon Stewart. And we're going to be talking--. this has been-- I feel like the news of the world. has so matched the climate here in the Northeast-- it's just. dark and gray and apocalyptic-- and this feeling that we are. hurtling towards something just truly.

unimaginable and inexplicable. And it's why today, I just don't even want to fucking. deal with it right now. I-- in all these different ways, today's show is going to be slightly different where--. once again, every now and again, we love to bring on experts, people of such regard and note, to come and play with me like a--. let's say a person with a cat and, like, a little string toy, me being, of course, the cat, those individuals.

being the person. And today, we want to talk about our ability. as a country to fix the seemingly. intractable systemic problems, more economic. And who better to do that with than an economist. and an economist that has, in some ways, changed the way that economists talk about the incentives that. go into our economy?

He is a behavioral economist, which is something I didn't. even know that there was-- but a brilliant thinker, and another in our continuing series of brilliant thinkers. We, obviously, had Geoffrey Hinton. on, who explained to me in childlike terms. what AI actually is. And I'm sure this guest will be no different. So I'm excited to get to it. Let's jump in now--. Richard Thaler. [MUSIC PLAYING].

Ladies and gentlemen, in our ongoing efforts. to entertain and educate, we, once again, are going to welcome somebody to the program who. is so accomplished and smart that it'll. be entertaining to watch him play with me like a monkey. with a small grape. That's right. Our guest today-- a professor from the University of Chicago, an American economist, the founding father--.

one of the founding fathers of behavioral economics--. and awarded a Nobel Prize in econ in 2017, which I assume he will be giving to Donald Trump. because that's where everybody has to give their Nobel Prizes. But please, Richard Thaler, thank you for joining us today. RICHARD THALER: It's a pleasure, Jon. And I was thinking of offering you the prize. JON STEWART: Well, it's very kind of you, sir. I could never--. I don't have enough space on my wall. I've got so many Peace Prizes up there.

RICHARD THALER: It's pretty small. The--. JON STEWART: The prize itself? RICHARD THALER: Yeah. But the one I've offered to Trump is bigger. But--. JON STEWART: Smart. That's a totally smart move on your part. That's why you're the behavioral economist, which, by the way, sir, what a fantastic. segue to get into this. Most people think of economists as. macroeconomists, microeconomists. Then there's this idea. You sort of created this field called behavioral economics.

So if you could just very briefly-- and I. apologize for the remedial nature of it. What is behavioral economics? How does it differ from what we consider to be. kind of traditional economics? And how did you even think of it? RICHARD THALER: Yeah. So I'll use one fancy word you may not know, which is pleonasm, pleonasm. JON STEWART: Wait, what? RICHARD THALER: Pleonasm. JON STEWART: Wow.

RICHARD THALER: So there's a guy smarter. than me named Herb Simon, who wrote. a definition of behavioral economics and said, the phrase seems like a pleonasm. What is that? A redundant phrase, meaning what other kind of economics. could there be? Presumably, economics is about the behavior. of people in markets. JON STEWART: Yes. Thank you. RICHARD THALER: Right? So why do we need that?

Well, the reason we need that is standard economics. leaves out the people. They're all about the markets. And then there are firms and workers and governments. and countries and consumers. But there are no people. You pick up a big economics textbook, you'll not. see the word "people.". There are agents. And these agents are--.

they're kind of like Spock in the old Star. Trek series, super--. JON STEWART: Logical. RICHARD THALER: Very logical and maximizing. They're as smart as the smartest economist. JON STEWART: So when economists make a model in terms of how. a market is going to behave, the assumptions that they make. are that the people that make up the model.

are logical, rational, and will behave in the manner that is--. maximizes value in the model? Would that be right? RICHARD THALER: Yes. And they do that, in part, because that's the easiest. kind of model to write down. JON STEWART: [LAUGHING]. It works out pretty simple. RICHARD THALER: Right. I mean, suppose you tried to write down a model of Jon. wandering through Costco, choosing the optimal stuff.

to put in a basket, right? I mean, no one can solve that problem. It's too hard. So you simplify the modeling task by saying, OK, he's going to choose the best bundle. And that you-- the math is easy. And then they add to that an assumption. that people are selfish jerks. JON STEWART: Well, I mean, I don't want to say anything. But that seems like a relatively simple assumption.

RICHARD THALER: Yeah? OK. So anyway, the idea is, well, what. if we introduce some people, because there are--. people run firms. People interact in markets. More and more, people are interacting in markets. every which way. You can-- right? You can bet on anything now. JON STEWART: But how would that manifest? So if I'm an economist and I want to make a model about--.

and I assume they model what would be the most efficient. market for cereal, and they want to model. how you would create that. How would introducing what you're suggesting change. economic modeling, which I assume means you would be. changing how policy is created because policy, I would assume then, is downstream. from economic modeling? RICHARD THALER: Right. Good.

JON STEWART: OK. RICHARD THALER: So let's start with a simple experiment. JON STEWART: Please. RICHARD THALER: We go into a classroom. I actually brought a prop. JON STEWART: What? RICHARD THALER: A mug. JON STEWART: What are you, Carrot Top? What are we doing here? RICHARD THALER: Yeah, yeah. JON STEWART: You're a professor. RICHARD THALER: I got a mug here. JON STEWART: All right. RICHARD THALER: Now, so what we did was we go into a classroom. And we put a mug--. I was teaching at Cornell at the time. So it was a Cornell insignia--. JON STEWART: Safety school. Let's just point out very quickly-- safety school. All right. RICHARD THALER: Yeah, OK.

William and--. JON STEWART: Not-- sir, sir, we don't have time for this. RICHARD THALER: OK, no slurs. So Cornell's a very fine school. JON STEWART: Yes. RICHARD THALER: So every other student has a mug. sitting in front of them. JON STEWART: OK. RICHARD THALER: And their neighbor doesn't get a mug. JON STEWART: OK. RICHARD THALER: OK? Now we have a market for the mugs. And we say if you have a mug, Jon, you can sell it. Here's a price list. If it's $10, will you sell it or keep it?

$9.50-- and then you go down until, OK, I'll sell at $8, but I won't at $7.50. JON STEWART: OK. RICHARD THALER: And then the guy sitting next to you. doesn't have a mug. He has a price list. At each of the following prices, will you buy? OK? JON STEWART: Yes. RICHARD THALER: So half the people are buyers. Half of them are potential sellers. JON STEWART: OK. RICHARD THALER: So their worth will. be determined in this market.

Now, what does economic theory say? It says the value you put on that mug should not depend on. whether it's sitting right in front of you. or on the desk next to you. Well, it turns out--. so the mugs are distributed at random. What we should see is--. let's rank the people from highest to lowest on how much. they liked one of those mugs.

The half that liked mugs the most should end up with them. JON STEWART: Yes, that's what traditional economics. would tell you. RICHARD THALER: Right. JON STEWART: OK. RICHARD THALER: So about half the mugs should change hands. JON STEWART: Oh, they're saying that-- they're assuming. that there is a rationality to people's. affection for the mugs? RICHARD THALER: Well, that it doesn't depend on--. JON STEWART: Or randomized? RICHARD THALER: We did randomize.

JON STEWART: OK. RICHARD THALER: Right? I mean, they were handed out at random. JON STEWART: Yeah, yeah. RICHARD THALER: And the assumption. is that the value you put on that mug. shouldn't depend on whether it's sitting directly in front. of you or adjacent to you or, in other words, whether you now own it. And that will be the key phrase. And we'll come back to that. JON STEWART: Right. You do realize I am failing this class right now. RICHARD THALER: No. No, no, Jon. JON STEWART: I am lost.

RICHARD THALER: You're doing great, you know. JON STEWART: All right. All right. RICHARD THALER: At current grade levels--. JON STEWART: Yes, sir. RICHARD THALER: --A plus plus. JON STEWART: Aw, very kind of you, sir. In the class-- do I have a mug? [CHUCKLES]. RICHARD THALER: You can buy one. JON STEWART: All right. RICHARD THALER: All right. JON STEWART: I didn't get a mug. Fair enough. RICHARD THALER: OK, so what happens? The people who have the mugs really don't wanna sell them. The people who don't have mugs aren't all that.

interested in buying one. JON STEWART: There's no market. RICHARD THALER: There is a market, but the people who have a mug demand about twice as much. to give it up as the ones who don't have a mug. are willing to buy it. JON STEWART: Oh. RICHARD THALER: So instead of half the mugs trading, we get about 20%. So what's the lesson? You know this old Stephen Stills song,

"Love the One You're With"? JON STEWART: Sure. RICHARD THALER: That's--. I call this the endowment effect, that if you're endowed with something, you wanna keep it. You won't give it up. But you don't have it? Eh, OK, if the price is right, I'll buy it. This is a phenomenon we call loss aversion, that if you have something, you're gonna. fight like hell to keep it.

If you don't have it, eh, meh. It's a mug. JON STEWART: The mug experiment is the genesis. of behavioral economics, if I can sum this up, because traditional economics would say, half the mugs would. change hands based on value and markets. and how they should operate in terms of people. that have something and people that. don't and people that want it. But what you've found is only 20%. changed hands because of behavioral tendencies.

that were not included in the model. RICHARD THALER: Correct. A plus. Come on, brother. [ROCK MUSIC]. JON STEWART: I'm gonna give you guys a little insight into who. I am as an individual. There's nothing that I enjoy more than what I like to call. a little breakfast for dinner. Now, breakfast for dinner, it's-- it's a treat. It takes me back to the childhood. when you felt like-- remember you'd get breakfast for dinner? And you were like, we're breaking all the rules.

What? Scrambled eggs? Where am I? What world is this? Magic Spoon! It gives you that feeling. Saturday morning cereal while you get their 13 grams. of protein, 0 sugar, 5 grams of net carbs per serving, which is how I always chose my cereals when I was younger. I used to say to my mother growing up, how many-- what's my-- what's my net carbs here? 5 grams? 7 grams? What are we-- what are we dealing with? How much protein in this bowl of chocolate Dracula cereal?

That's right, Count Chocula. Man, did I eat like crap. But this stuff, Magic Spoon, keeps. you fueled, whether it's breakfast, late-night snack, post-workout, whatever it is. Magic Spoon. Look for Magic Spoon on Amazon or at your nearest. grocery store. There are plant-based versions of the cereal as well. Even vegans get to feel like they had a chomp. You'll find vegan options at Whole Foods, or get $5 off your next order at MagicSpoon.com/tws.

That's MagicSpoon.com/tws for $5 off. [ROCK MUSIC]. So this all sounds, if I may, insane to me. because there could be somebody who is, like, a mug--. RICHARD THALER: People have called me worse. JON STEWART: --a mug fetishist. But the idea that economics don't. take into account-- because buy low, sell high. takes into account greed. It takes into account, you're trying to get--.

it seems like basic economics does-- you know--. well-- RICHARD THALER: Well, let me--. JON STEWART: Go ahead. RICHARD THALER: Let me give you an example. JON STEWART: Yeah. RICHARD THALER: Suppose that your uncle. gives you an inheritance. JON STEWART: Sentimental. Is it a mug or is it something different? RICHARD THALER: It's, like, 1,000 shares of some stock. JON STEWART: Oh. OK. RICHARD THALER: But my uncle gave it to me. Your uncle gave it to you. JON STEWART: All right. RICHARD THALER: So you-- you send it over to your wealth.

manager or broker or whatever. JON STEWART: All right, the 1,000. shares I got from my uncle. RICHARD THALER: Yeah. And then the question is, do you keep them? Let's ignore taxes. JON STEWART: OK. Do I keep the shares or do I sell them? RICHARD THALER: Or-- yeah. JON STEWART: Or the money. RICHARD THALER: You put them into an index fund. JON STEWART: OK. RICHARD THALER: Economic theory would say, the fact that you--. if there are no tax issues, the fact you got those shares from. your uncle, if you wouldn't have.

owned 1,000 shares of that company before, you shouldn't now. Just put it in with all the other stuff. JON STEWART: Don't do anything with it? RICHARD THALER: No-- no, you should--. JON STEWART: Just keep it? RICHARD THALER: No. Not just keep it. JON STEWART: Oh. RICHARD THALER: Diversify the way you would everything else. JON STEWART: So those 1,000 shares should be turned. into-- some should be in higher-risk, some should be in medium-risk, some should be in fixed-income?

I should split that up in the manner. that I would split up any asset that I have? RICHARD THALER: Exactly. JON STEWART: That's what standard economic theory. would say. RICHARD THALER: Right. JON STEWART: Standard economic theory says, the best thing. I would do is to do that. But behavioral economics says, I won't do that for a variety. of reasons, one being maybe I'm lazy, two being maybe I have sentimental value to my uncle. and therefore those 1,000 shares are the only thing I.

have to-- to remember him by. Apparently I didn't take any pictures. I just have this 1,000-share inheritance, so I'm not going to do that. And so standard economics misses all those externalities. that are part of the human condition, and therefore their models suck. RICHARD THALER: Well, we'll not make. a value judgment, right, yet. JON STEWART: Too pejorative. Too pejorative. RICHARD THALER: Too pejorative.

You can say that. But let me just add that, notice one. result of this experiment is people. have a tendency to just stick with what they have. So if they got a mug, they're much. more likely to end up with it than if they didn't get a mug. JON STEWART: OK, I see what--. OK, OK. Possession, 9/10 of the law. And standard economics doesn't take in possession. And how far would this possession.

theory skew economic models if they. don't take it into account? For instance, I have a house, so the theory of economics. would be, I will continue to try and get. better, more valuable housing or diversify, rather than just holding it since I have it. RICHARD THALER: Yeah, and it's that particular house. So we call this status-quo bias--. JON STEWART: OK. RICHARD THALER: --that people have a tendency to just.

stick with what they have. JON STEWART: Yes. A body at rest tends to stay at rest. RICHARD THALER: Exactly. JON STEWART: Right. Do they really not take this into account. in standard economics? That seems insane to me. Like, is that really something they. don't-- they don't consider? RICHARD THALER: They would consider it. if there's transaction costs. But in the stock example, there are none. It was-- the-- the cost of changing 1,000. shares of Google into 1,000--.

put that money into an index fund will cost you $10. So if it was an offer to buy your house, then there would be costs to moving and--. JON STEWART: Yeah, it's a pain in the ass. RICHARD THALER: Right. But for-- for most things, the economist. would assume that because the cost of switching things around.

is low, we can ignore it. JON STEWART: So how does this manifest in markets? 'Cause I wanna-- the reason why I wanna talk about this, and I'll give the broader example, is things like climate policy or the ACA or those kinds. of things, these are solutions to-- because economics. is in some ways--. it's the lubricant that we use to create solutions to problems. or better conditions for people's lives.

and how that affects all that. And I think the premise here is that standard economics misses. And so the solutions that we design. for the problems in our lives are ill-conceived. RICHARD THALER: Great, so let's take. climate change as an example. JON STEWART: Great. RICHARD THALER: All economists, including this one, think that the first thing we should have done when.

we figured out there was climate change. is impose a carbon tax. JON STEWART: That-- wait. Most economists think that? RICHARD THALER: Yes. JON STEWART: May I suggest that that's incorrect? RICHARD THALER: You may, but I--. I'm included in those. JON STEWART: Can I say why I think it's incorrect? RICHARD THALER: Yeah, sure. JON STEWART: So the minute you put a carbon tax on, people see their energy prices go up. And you will no longer be serving in office politically.

RICHARD THALER: All right. Then we're in agreement. What-- what I'm saying is if--. if you're God or King or President. and you could say, All right, what policy should we have? then the correct policy is the one. that sets the prices to give people the incentive to--. so if we increase the cost of heating your home--.

JON STEWART: Yes? RICHARD THALER: --to reflect the externality, the-- the costs you're imposing on other people--. JON STEWART: Yes? RICHARD THALER: --then you'll have the correct incentives. to put in solar or insulate or switch to a heat. pump or whatever. We run a poll of expert economists. every couple of weeks at the University of Chicago, and there is one on that. And yeah, everybody says, yeah, that would be the ideal policy.

JON STEWART: So they're saying a carbon tax would be the thing. to solve the climate crisis because rather than changing. the behavior, you have to make using fossil fuels, which. are the driver of climate change, so much more expensive that it changes. people's behaviors because they won't. change behavior on their own. Is that standard economics, or is that behavioral economics? RICHARD THALER: No, that's standard economics. JON STEWART: That's standard. RICHARD THALER: That's standard.

JON STEWART: Feels behavioral, but that's standard. RICHARD THALER: No, because-- it's standard because it's. just changed the price. And then it's-- the alternative is we say, you--. you're not allowed to have--. we can't have cars says that get less than such-and-such. gas mileage. JON STEWART: Right, which we've done. RICHARD THALER: We have-- right. So we have lots of regulations. We essentially don't have a carbon tax.

JON STEWART: So the way we do it is-- so standard economics, what they say is, we have a series of either incentives. or regulations. So it would be a mix of subsidies and regulations. And that is how we will manage the energy. market while also keeping an eye. on trying to reduce emissions. And that's how economists would design a program to solve it. So we've done that with--.

we subsidize solar. We subsidize electric vehicles. And we regulate the miles that they must get there. And they must have a catalytic converter. All that is what you would consider to be. standard economic theory. RICHARD THALER: No, no. So we're almost there. JON STEWART: I am fucking this up. RICHARD THALER: You are not. JON STEWART: [LAUGHS]. RICHARD THALER: You're not. So what economists would say is, we don't need all.

those rules and regulations. Just set the price right. JON STEWART: But doesn't the market set the price? Doesn't-- isn't that free markets? RICHARD THALER: No-- no. The carbon tax will automatically. raise the price of a Hummer, of operating a Hummer, because it only gets eight miles to the gallon. compared to some EV. So we don't have to regulate. All we have to do is get the price right. That's standard economics.

JON STEWART: And then the market will change. RICHARD THALER: Then the market will change. JON STEWART: But isn't that just an intervention? How is that a market? That's just the government saying, if we set a price that is unreasonable, the market will behave. RICHARD THALER: It's just setting the price. so that you have the incentive to act in a way. that's best for society. JON STEWART: But that's not economics. Economics doesn't take into account. what's best for society. It takes--. RICHARD THALER: Yes, yes, it does. Yes, it-- JON STEWART: What?

Wait a minute. RICHARD THALER: Whoa, whoa, whoa. Jon, one-- JON STEWART: Wait a minute. RICHARD THALER: I'm-- well-- well, uh-- let me--. JON STEWART: Hold on here. [LAUGHS]. RICHARD THALER: Economists know about externalities. And now here's the point I wanna make. We don't have carbon taxes. Why? Because-- and you started with this, so you got to the answer. right away. You got to this because people hate taxes.

They hate high prices. So what do we have? We have lots of subsidies. We have no taxes. JON STEWART: Yes. Well, we have-- that's not exactly--. I mean, we have gas taxes. Like, if you go to California, it's. very different than buying gas in-- in New York. RICHARD THALER: Correct. JON STEWART: And very different than buying gas. in Minnesota or-- you know. RICHARD THALER: That's-- that's-- that's right. But even in high-gasoline-tax states, the taxes on emissions.

are still way too low compared to what they should be. JON STEWART: Compared to what they should be if our goal. is to reduce carbon emissions. But that's not the goal of economics. The goal of economics in a capitalist system. is to make the most amount of money for your shareholders. So my point is, since when is economics about improving. the human condition and not just making. money for the companies that are extracting the fossil fuels.

from the Earth? Isn't that-- everything else is interventionist. RICHARD THALER: OK, so I did not. anticipate that my role here was going. to be as the defender of neoclassical economics, but here I am. JON STEWART: Oh, we're here, baby. RICHARD THALER: I am here. JON STEWART: All right. RICHARD THALER: And my economist friends will be. proud that I'm defending them. JON STEWART: All right. Beautiful.

RICHARD THALER: So, look, there's an--. an economist named Arthur Pigou. JON STEWART: Oh, Pigou's work is--. I'd never-- I don't miss an essay. RICHARD THALER: Yeah. So, no, he's died 100 years ago, but--. JON STEWART: Oh. That's what I meant. RICHARD THALER: Anyway, he-- there are Pigouvian taxes. So in any economics textbook, it. will say that if you're causing some harm, then the way to fix it is to charge you for the harm.

you're causing so that you will decide just the--. the right amount of harm. JON STEWART: Is Pigouvian familiar with the 2008. financial crisis? RICHARD THALER: No, no. JON STEWART: Because that is not what happens. RICHARD THALER: OK. I'm not saying any economist thinks that we. have these optimal policies. What I'm saying is--.

JON STEWART: That's how it's supposed to work. RICHARD THALER: --that's the way any economist basically. would advise-- take any Council of Economic Advisors. before this one, because they always had real economists. They would all be saying something. similar to, well, what we really should do is this. But then they would say, but it's true, boss, the people hate taxes, and if they're Republicans,

they really hate taxes. But we all hate paying taxes, and so we'll subsidize EVs. We won't tax Hummers and we won't tax gas. and we won't tax--. And that all goes back to the mugs, that it's because we hate losing more than we.

like winning. So what we'll do is we'll have all these policies where we. subsidize you to do the right thing, as opposed. to penalizing you via prices for doing the wrong thing. [ROCK MUSIC]. JON STEWART: Folks, do you love coffee, but you think the names are lame? Sanka. Maxwell House. Lame! I don't drink-- I don't drink somebody's house.

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with code STEWART, exclusively on SharkNinja.com. while supplies last. [ROCK MUSIC]. So this is the problem I think that we get to then. with economics, 'cause let's say we'll bring. it back to climate policy. What I'm suggesting is all markets. are designed to some extent. We have this fiction that we live in a free market. where it's only the rules of supply and demand. and that our policies have to basically give way.

to these market forces that, if left to their own devices, will solve these--. What I'm getting at is, government intervention. in markets is seen as a negative and paternalistic. anti-capitalist movement, where muckety mucks and elites design. systems that are not as efficient.

and functioning as capitalist markets. But we all know that that's a fiction, that we. intervene in markets all the--. The big thing is always, the government's not supposed. to pick winners and losers. But they do it all the time, and they've done it since time. immemorial as governments. RICHARD THALER: There are two different issues here. Putting a tax on a bad, like pollution, isn't interfering with markets. It's-- it's making the market efficient in the sense that.

the price people are paying reflects the costs. they impose on others. And it's not picking winners and losers. It's picking-- there will be losers-- people who. like to drive gas-guzzling cars will lose, but we're not aiming it at them. It's a free choice. JON STEWART: No, they won't lose, because let's say that's because they.

have the money to burn. It doesn't affect them. In other words, the downstream cost of the pollution that they. create won't affect them because they. are buffeted either by geography or wealth. so that the tax itself is--. RICHARD THALER: No, but look. Let's think of what we did. What did we do? We subsidized EVs. And who was the beneficiary of that? Mostly rich guys.

JON STEWART: Right. But we also-- the EPA regulated what you could. put out into the environment. I mean, that's how-- we got cleaner. air when the government regulated. what you could actually do. RICHARD THALER: That's true. But the choice to have subsidies and regulations, it benefited some companies versus others. I mean, Tesla was a big beneficiary of this.

JON STEWART: Exactly. No, I'm saying, government always picks winners and losers. and then pretends like that's something that they can't do. Like, Donald Trump's a great example. He's like, government can't pick winners and losers. Oh, NVIDIA, I'll let you sell chips to China. if you give me-- or Intel, how about this? I'll take 10% of your company. Like, I guess what I'm saying is, aren't we all operating under a fiction? And if we were more--. if we were more honest about the way economies worked,

we could be more honest about the way. we solve some of these larger-scale problems. RICHARD THALER: So I think--. OK, you're skipping one step ahead. JON STEWART: I don't wanna do that. Take me back. Take me back. RICHARD THALER: OK. So in a world where we don't know any of the people. in any of the companies-- so we're back in the world. of inside an economist's head. JON STEWART: Oh, boy. RICHARD THALER: We just have-- there are firms. and there are people. And there's something people are doing.

that causes harm to others. The solution to that that all economists agree to. is, put a price on that bad and then let the market clear. And some-- the people who produce bads will suffer. And if they're poor, they'll suffer more, but that's true of all policies. That part is uncontroversial. I'm-- I--.

I'm not saying, that's a world we live in. In fact, my point is, Sweden--. JON STEWART: So economists don't live in the world. that we live in. RICHARD THALER: No, no. They would call this a first-best, meaning. if they could design everything, that's the way they would do it. They would try to make the prices reflect the harms that. are people causing and then let the chips fall where they may.

That's very different from giving contracts. to your buddies, which, you know, has been going on at the local level. as long as there have been politicians and buddies. We've just taken it to new levels and--. JON STEWART: Is the idea of behavioral economics. to help economists get more grounded in what.

the actual externalities are? Is that the point? Because the way you're describing economists. and the way that they talk about the economy. seems utterly removed from-- from reality, to some extent. RICHARD THALER: No-- no--. OK, so here-- here's where--. JON STEWART: I am the worst student you have ever had. [LAUGHS]. RICHARD THALER: Oh, Jon, you are so far from that. These are very good questions. JON STEWART: All right. Let's get to it.

RICHARD THALER: All right. So the point I wanna start with is economists don't have. a good answer to the question, Why do we have only subsidies. rather than taxes? because as far as economists are concerned, they're the same. It's just a sign. If we subsidize the good thing or tax. the bad thing, if there are red mugs and blue mugs.

and the red mugs--. JON STEWART: OK. In their model, they see no distinction. between a subsidy and a tax. And what you're saying is, a tax. is actually much worse than a subsidy in real-world economics. because people view losses as more damaging than wins, which is the subsidy. RICHARD THALER: Perfect. You nailed it. JON STEWART: All right. RICHARD THALER: So if we're trying to understand the world, it's important to understand this thing about losses.

and about status-quo bias, that the people tend. to stick with what they have. And we can use that to help or hurt people. JON STEWART: So how would you-- taking behavioral economics, staying with the climate model, if an economist would say, it really makes no difference whether you do a tax. or a subsidy, but very clearly we only do subsidies, so somebody must understand the political realities of all.

this, we've understood since the '70s that. the world is warming through our climate policies. They've had Kyoto treaties and giant conferences every year. where everybody flies private jets to discuss how we're. gonna change fossil fuels. And they all work through subsidies and caps. and cap-and-trade and net neutrality. and all these different goals and things. And nothing has really changed.

We've made certainly advances in solar and wind and batteries. and EVs, but the energy needs of the world. continue to spiral. And AI and--. My point is everything we've done. has been utterly inadequate. And I guess I'm trying to figure. out, what are we misunderstanding. about the solutions? And how can behavioral economics give us.

a better angle on it than the standard economics, which have--. the standard economics and the standard political realities, which have failed us? RICHARD THALER: God, almost 20 years ago, I wrote a book with Cass Sunstein called Nudge. JON STEWART: Yes. I remember Nudge. RICHARD THALER: It was a book about how we can help. in this kind of situation. And so here's one example.

All right. We're in this world where gas-guzzling cars. are too cheap. And we'd like-- we all would like to put a tax on that, but we can't. Well, one thing we can do is we can put labels on the cars, telling you how much it's gonna cost you to operate this car. Well, that will help a little. JON STEWART: Like a food labeling will. help you with-- with health. And if people see, like, oh, this car's gonna cost me $6,000.

a year to buy gas for, this other car's gonna cost me. $3,000 a year to buy gas for, that's a piece. of information that will help me make a decision. And that decision, we think, will also. be better for the environment. RICHARD THALER: Right. JON STEWART: And so those are little things, nudges, that move us in the right direction. RICHARD THALER: Right. Another example is you probably get. a utility bill that I'm guessing. you personally don't look at--.

JON STEWART: Oh, I look at it every day. RICHARD THALER: --that tells you how much energy you use, compared to your neighbors with a similar house. JON STEWART: Ooh. You're going with shame. Shame-- you're going with economic benefit and then. also shame. RICHARD THALER: Well, shame and-- no, and patting on the back. JON STEWART: Ah. RICHARD THALER: Right? JON STEWART: Yeah. RICHARD THALER: If you've put in solar or heat pump--. JON STEWART: All right. RICHARD THALER: --they're going, oh, Jon. JON STEWART: [LAUGHS].

RICHARD THALER: Most guys with McMansions like yours--. JON STEWART: You are misunderstanding. my neighborhood, sir. [LAUGHS] They would in no way. They'd be like, what are you, a pussy? What are you doing over there? RICHARD THALER: OK, so in any case, my co-author, Cass. Sunstein, was the so-called regulation czar for President. Obama for a while. And his job was to make sure all. the regulations that were being passed did more good than bad.

JON STEWART: A series of nudges that would incentivize people. through a variety of psychological, some would. say, manipulations. But-- but understanding that, that. could drive our economy incrementally to a more. positive climate future. Let me ask you a question. RICHARD THALER: Yeah. JON STEWART: Are we in a nudge economy, or should you write a book called Shove? Because it feels like the incentives and subsidies.

and taxes are all inadequate to address the reality. of people's behavior and--. RICHARD THALER: Yeah, OK. JON STEWART: --the totality of what we face. Why aren't we redesigning the entire systems? Go ahead. RICHARD THALER: So Nudge has two sets of critics. One you could think of as complete free-market guys. that's saying, go away.

Let markets do it. JON STEWART: Yeah, but they live in la la land. RICHARD THALER: Yeah. Then there are the others, who are saying, come on, we have to tell people what to do. So Shove-- you want me to-- my next book. should be called Shove? JON STEWART: Yes. RICHARD THALER: And--. JON STEWART: Let me-- yeah. RICHARD THALER: Well, but--. JON STEWART: You can go ahead, and then. I'll explain why I think I'm different than those two. But go ahead. RICHARD THALER: OK. And I would just say-- and there's at least-- one.

of my colleagues has written such a book. And I will point out to that person and you--. JON STEWART: Yeah. RICHARD THALER: --that if we're in that world, sometimes. Trump is president. So if we wanna design a system where the government just. tells us what to do as opposed to nudge us, wouldn't that be worse? JON STEWART: Well, first of all, the government. tells us what to do all the time.

I mean any-- any regulation and all those kinds of things. So it's--. RICHARD THALER: You saying we should--. JON STEWART: Shove. RICHARD THALER: We should shove and--. JON STEWART: Let me explain what I'm saying. RICHARD THALER: All right. Do it. JON STEWART: So when I say, shove, I don't mean. the government saying to people, you are not allowed to use this much electricity, or you are not allowed to use this much gas, or do that. When I say, shove, it means understanding what the 10,000. years of human endeavor and progress.

on this Earth really means. We are a species that, if shit's easier, we will do it that way. Like, the horse didn't go by the wayside. of the car because of anything other than, like, wait a minute. I can get there in half the time. and not have the smell of horse shit? Done. Like, we are incentivized to, you've given me a product. that makes my life easier. We don't care where the electricity comes from.

When I say, shove, it's this. It's, stop thinking incrementally. about the subsidies and the thing. People want the convenience that modern life has provided. them, whether they live in the global South. or whether they live in our thing. And shove means these incremental systems, and with all its political peril and all those things, aren't what's actually gonna solve the problem. Shove means looking at mitigating.

the damage that human beings, in all their greed. and convenience, need. In other words, shove is not telling people what to do. It's getting scientists to help us clean up this mess, meaning. carbon capture or other types of models, because what you. won't be able to do through a series of nudges. is make people not want the most.

efficient, convenient, cheapest thing. that they can possibly get. And anything that doesn't take that into account is naive. So I'm not suggesting a paternalistic government that. decides, oh, my God, climate changes. and we've gotta be better people. And how do we incentivize everyone to be better people? I don't think-- I mean, my view is you can't.

You actually need to think completely differently. and create a model that creates robust markets. in damage mitigation and carbon mitigation. That's my position. RICHARD THALER: OK, but what I would say. is, that position is identical to the one that you mocked. JON STEWART: Whoa! Whoa!

RICHARD THALER: The standard economic prescription, which. is, set the prices right and then people. will have all the incentive to invent the new technologies. to solve it. If the carbon prices are right, then people are gonna. pour all kinds of money into--. JON STEWART: That's only one way of doing it, though. That's-- setting the carbon price is not necessarily.

the only way to do it. The other way to do it is create a market for mitigation. That's what I'm saying. It's not just about carbon. RICHARD THALER: Yeah, there will. be a market for mitigation. JON STEWART: Yes. RICHARD THALER: But if-- if it doesn't. cost you much to emit carbon, then people won't buy it. JON STEWART: No, it's not that people will buy it. It's that you need to create a market for profit.

for-- for companies, not people. RICHARD THALER: That-- that--. Jon. JON STEWART: Am I-- am I nuts? RICHARD THALER: Uh, yeah. JON STEWART: [LAUGHS, CLAPS]. RICHARD THALER: Yeah. Yeah. Yeah. [ROCK MUSIC]. JON STEWART: You know what's interesting about the avocado? And I've never really thought about this. When you cut it open, you get that perfect little scoop. with the little indentation. Have you ever thought to yourself, I bet that's. comfortable to sleep in? Almost looks like a body shape where you could just lie there.

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to get up to 15% off. AvocadoGreenMattress.com/tws for up to 15% off mattresses. AvocadoGreenMattress.com/tws. [ROCK MUSIC]. But then explain to me how Nudge is gonna-- you know, everything we've been talking about is, this is. an-- this is an urgent crisis. And all the nudging and subsidies is only incrementally. inching us to something.

Meanwhile, you have a whole global South. that hasn't developed the progress at the pace. that the global North has. And now we're telling them, you have. to do it through these series of subsidies and-- and markets. That seems unrealistic. It seems more realistic to go to Exxon. or wherever they are and go, we'll. give you a shit-ton of money if you can figure out how to clean. carbon out of our atmosphere. RICHARD THALER: Well, but we wouldn't have to go to them. to do that if the prices were right.

JON STEWART: But what I'm saying. is, if you live in the reality of the world-- look. at the yellow vest movement in Europe, like, even Europe with their, we're doing the right thing. and we ride our bikes everywhere. When you set the carbon price not to the market of supply. and demand, but to the idea of what. would be best for the world, you make yourself. politically untenable. And that's-- that's, to me, the largest problem.

RICHARD THALER: We're in agreement. And the--. JON STEWART: You just said I was out in the-- wait a minute! RICHARD THALER: No. We are in agreement. We-- JON STEWART: [LAUGHS]. RICHARD THALER: No, but Jon, you want--. JON STEWART: You son of a--. RICHARD THALER: You wanna have it both ways. JON STEWART: Professor, I'm gonna-- when are. your office hours, Professor? I'm coming in there. This grade, C minus? Come on, man! RICHARD THALER: Man, you know what? I've given you office hours at 8:00 AM, California time.

This is the first time I've ever had office hours at 8. o'clock in the morning, Jon. JON STEWART: Sir, point taken. RICHARD THALER: And I have a long career. JON STEWART: Point taken. Objection sustained. RICHARD THALER: You know, you have office hours. any time you want, but it's gonna. be starting at 10:00 my time--. JON STEWART: Yes. Done. RICHARD THALER: --and henceforth. JON STEWART: Works better for me, too. RICHARD THALER: So let-- let--. let me move to a slight-- one direction.

JON STEWART: Yes, yes, yes. RICHARD THALER: GPS. JON STEWART: OK. RICHARD THALER: If you have to-- you do leave. home occasionally, I hear? JON STEWART: Pretty occasionally. RICHARD THALER: Yeah. JON STEWART: So that's not-- not a ton. RICHARD THALER: Yeah. You know--. JON STEWART: Pretty comfortable. RICHARD THALER: --before we get off. the topic of status-quo bias--. JON STEWART: Yes, yes. RICHARD THALER: --some people have called me. the first clinical economist. JON STEWART: Because of the psychological aspect of what. you do? OK. RICHARD THALER: Yeah, yeah, yeah.

And I-- I think there is some danger. you suffer from status-quo bias syndrome. JON STEWART: Oh. Tell me more. You know I'm always up for having a new illness. RICHARD THALER: Yeah. Doesn't like leaving home. JON STEWART: Yeah. No questions asked there. RICHARD THALER: Starts every show with. some left-handed scribbling--. JON STEWART: Yes, sir. RICHARD THALER: --that looks sort of panic. JON STEWART: Oh, by the way, if anybody would see it,

there is no artistry there. It is really--. RICHARD THALER: Britney and-- and her team--. JON STEWART: Yes, our producers. Yeah. RICHARD THALER: Yeah. They-- they tell me that, there's a lot of status-quo. bias syndrome in our boss--. JON STEWART: They're saying, inertia. There's a lot of inertia. Yeah, I got you. RICHARD THALER: Yeah, and-- and I would add, continuing. to root for the Mets for--. JON STEWART: Oh, sir, yeah.

I'm-- if you're saying that I somehow. seem to be in love with a type of pain, you know, yeah. Masochism runs in my family. RICHARD THALER: I'm gonna get in a lot. of trouble for the following statement, and then I will move on. JON STEWART: Yes, please. RICHARD THALER: I don't think there's anything. wrong with firing your team. JON STEWART: Oh, sir, you're treading on very. dangerous ground right now. This is--. RICHARD THALER: Look, I also grew up in New Jersey. JON STEWART: This type of heresy, sir.

Galileo-- Galileo was-- was killed for less, sir. RICHARD THALER: Yeah, I know. I know. We could both-- JON STEWART: All right. RICHARD THALER: We may not wanna air this episode, you know, but--. because I think we both could get burned at the stake. JON STEWART: Not at all. Not at all. RICHARD THALER: But-- but I grew up in North Jersey. So I grew up a Yankees fan in the Mantle-and-Maris. glory years. JON STEWART: Sure. RICHARD THALER: And then I grew to hate George Steinbrenner.

And in my class on managerial decision-making, I had one of my rules. Don't be like George Steinbrenner. JON STEWART: Fair enough. RICHARD THALER: OK. JON STEWART: You're saying, don't. go to jail for any violations of certain shipping rules, or is that-- RICHARD THALER: No, no. I mean, don't hire and fire the same manager three times. JON STEWART: Oh. OK. RICHARD THALER: Every--. JON STEWART: But George Steinbrenner. did win championships. RICHARD THALER: He did, but not in a way that--. JON STEWART: You enjoyed.

RICHARD THALER: Or I approved of. JON STEWART: OK. RICHARD THALER: And so I fired the Yankees. JON STEWART: All right. RICHARD THALER: And I'm just saying, you should--. JON STEWART: Yes. But after you fired the Yankees, they apparently still had a job. So what I'm saying is--. RICHARD THALER: No, but--. JON STEWART: --that firing has no impact. RICHARD THALER: Look. You know, but look, my son suffers from this. When he was a kid, he fell in love with the Dolphins. JON STEWART: Ah. Great-- great uniform.

Dan Marino. I'm assuming that was the Dan Marino era. RICHARD THALER: A great uniform. His wife and two daughters, they live in San Francisco. They all adopted the Niners. JON STEWART: I could see that. RICHARD THALER: But they have to put up with that turquoise. and orange. JON STEWART: Yeah, yeah. RICHARD THALER: You know? The costs he's imposed. JON STEWART: So is the point you're making here, if I may-- is the point you're making that I am not giving. humankind enough credit for an ability to adapt.

to understanding that the long-term harms. that our short-term actions are taking are damaging us, and that if I'm just nudging them enough, we will understand that long-term--. that the short-term pleasure is not worth the long-term harm? RICHARD THALER: No. I mean, what I was just doing is giving you a little shit. But let's--. JON STEWART: [LAUGHS, CLAPS]. RICHARD THALER: Let-- let's-- let's get.

back to climate change. GPS is my favorite kind of nudge. And I'm-- I have geographical--. I'm geographically dyslexic. And GPS has, like, saved me. I can wander around in a strange city. and find my way back to my hotel all by myself.

JON STEWART: You're a big boy. RICHARD THALER: Normally, I need my wife. leading me by the hand. JON STEWART: Yes. RICHARD THALER: Now-- and my motto-- my mantra is, design policies, make it easy. JON STEWART: Yes. RICHARD THALER: That's my mantra. Make it easy. JON STEWART: You and I are agreeing. RICHARD THALER: OK. JON STEWART: And you can't tell people to go back to paper maps. because-- so let's say we found out that GPS emits something. through the towers that they use.

and the satellites that is heating the environment. Nudging people back to maps isn't going to work. RICHARD THALER: No--. JON STEWART: And so what I'm saying is, you have to create shoves that create. new avenues and new incentives that allow people. to still enjoy the benefits of that progress while mitigating. RICHARD THALER: No, but we don't-- no--. nobody's required to use GPS. JON STEWART: But it's better. RICHARD THALER: It's-- exactly. JON STEWART: Right.

That's my point. And oil and-- like, energy is better. People need energy. And-- and a lot of the suggestions. questions from governments is, let's use less. RICHARD THALER: OK. So bear with me, Jon. JON STEWART: Yeah, please. RICHARD THALER: Let's switch to a different problem. JON STEWART: Let's do ACA. Let's do health care, 'cause that's. another one that I think in terms of its incentives. and subsidies. RICHARD THALER: Yes. JON STEWART: But it's nudging a broken system. when we should be shoving.

RICHARD THALER: OK, so let's go there by way of retirement. saving, because I--. JON STEWART: Yes. RICHARD THALER: OK? JON STEWART: Let's do it. RICHARD THALER: Because that one, we did a little thing. Right? So one of the problems economists ignore. is that people have self-control problems. You know, we're fat. We drink too much. We don't save enough. JON STEWART: Dark vision. RICHARD THALER: We-- look around.

Open your eyes. JON STEWART: Social Security was kind. of a way to mitigate that, no? RICHARD THALER: Yeah, but it works pretty well. for one segment, which is people who. have regular, low-paying jobs. The replacement rate is kind of OK, but if you're. in and out, not so much. And for the upper middle class, Social Security isn't.

enough really to live on. And we used to have these old-fashioned, defined-benefit. pension plans that guaranteed you an annuity, depending on how much you made and how long you worked. And they got replaced with these 401(k) things. JON STEWART: And those pensions were generally. matched by employers. And they were part of the responsibility and compensation.

package that you would get from the old world of, you went to work at a factory and you left it 45 years later. RICHARD THALER: And you had no decisions to make. And with the new 401(k), you had to join and decide how much. to save and how to invest. And that was hard. And a lot of people in the early days of these. didn't even join, and the company was. matching their contributions. It's the dumbest thing.

It's turning down free money. So how did we, I'm not gonna say, fix this, but improve it? One thing we did was we said-- it used to be, if you wanted to be in the 401(k), you had to fill out a form. We said, OK, let's change the default. People are good at doing nothing. So we-- we--. JON STEWART: [LAUGHS] You're not a fan of people, sir.

RICHARD THALER: Can we go back, rewind the tape. to the diagnosis of Jon? JON STEWART: Yes. RICHARD THALER: OK, so you got-- now get--. you now get a message saying, welcome to our firm. We're gonna enroll you in the 401(k) plan. unless you fill out this form. JON STEWART: Right, right. So-- so you made it so that the opt-out took an action, whereas the opt-in did not take an action, therefore.

incentivizing the opt-in, which is the better outcome. for people in terms of money. RICHARD THALER: Right. And incentivizing costs just by changing the box. So again, what do a-- a regular economist would assume, it doesn't matter what box is ticked if, by joining, I get a match. JON STEWART: Would they really? Like, they don't-- regular economists. don't take into account pain in the ass,

like, that level of it? RICHARD THALER: They would say, the cost of ticking a box. versus 6% of your salary? I mean, really? JON STEWART: Here's what I would say. Businesses understand that. That's why your credit card bill is unintelligible. Like, when you read all that fine print, you have no idea what you're reading. And that's purpose obfuscation. It's purposeful. They understand that people aren't gonna wade through that. They're not gonna understand that, wait a minute, after six months, this goes up to 21%?

They-- they understand how to manipulate us all the time. RICHARD THALER: Absolutely. All right. We are exactly on the same page. JON STEWART: Yes. The system is designed to exploit us. And people don't have an ability. to understand that because of the way. that the system is allowed to be designed. RICHARD THALER: Right. And look, making it opt out is good for people. And we improved pension plans just by switching.

which box is ticked. JON STEWART: Right. No, that's-- that sounds like a very smart move. RICHARD THALER: But of course, companies learn. the same trick, not from us. JON STEWART: [LAUGHS]. RICHARD THALER: Or at least I'm not taking the blame. JON STEWART: They're reverse-engineering, of course. Nabisco makes chips that--. they design them so that they're. almost impossible not to eat. You get fat. And then big pharma makes GLP-1s.

And that makes it so that you control your appetite. So then Nabisco has to engineer that to get past. I mean, this is the cycle of exploitation. And, I mean, that-- again, that gets back to, the incentive here is greed. That's what we're doing. And that's why I'm saying, nudges sometimes are. inadequate and shoves-- yeah. RICHARD THALER: OK, I totally agree. So far, the only thing we disagree about--. JON STEWART: Mets.

The Mets. RICHARD THALER: Yeah, OK, the two things we disagree about. JON STEWART: [LAUGHS]. [ROCK MUSIC]. How long do you think it's gonna take. you to cook dinner tonight? What do you think it's gonna take? 30 minutes? 60 minutes? It takes me about four hours because I. like to have it roasted by the sun's heat. and put the ingredients together and just. lay it on a windowsill. And whatever happens, happens. That's why I'm always hungry. But Factor is bringing you deliciousness in two minutes,

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RICHARD THALER: The two things we disagree about. are the Mets--. JON STEWART: Yeah. RICHARD THALER: --and whether getting the price is right. would be sufficient. JON STEWART: So let's look at the ACA, 'cause the whole idea there is if we create. a market for insurance, we'll get the prices right. and we'll subsidize for the people who can't, because to get the market to be efficient, we need everybody to be in it. And to get the insurance companies to allow everybody. to be in it, we're gonna have to make sure that we subsidize.

them, because the markets include. people with pre-existing conditions or people. who are not healthy. And the insurance companies don't wanna deal with that. So we do little nudges about, you can check this box, 'cause it's a very complicated market. And I look at that and think, we. are papering over a broken system. with nudges when we have to shove ourselves into what makes. the most sense for health care, which.

every other developed country in the world. has already realized, which is free-market incentives. don't work in a system with those kinds of externalities. Health care is not, will never be, a functioning market. And the system is designed to exploit. people's need to not die. And by creating the ACA and all those other things, we're papering over what should be the reality of the system, which is, centralizing it is the only way.

to create something that will efficiently help people. not die. That's-- that's where I would crystallize. my argument in all of this. RICHARD THALER: Right. And obviously, we're gonna have no listeners left if we--. if we--. JON STEWART: [LAUGHS] Who-- we don't have--. RICHARD THALER: Yeah. JON STEWART: All right. RICHARD THALER: Yeah, if we go all the way down that path. What I would-- here's what I will say.

I was actually in the White House. while the webs-- the catastrophic website that was. being designed for ACA, which crashed on the opening day, somebody was designing that. And I was talking to somebody. I said, could--. JON STEWART: Wait. You were in the White House while that was going on? RICHARD THALER: While they were--. not while it was crashing. Before that, when somebody was designing it.

And I said, oh, can I go talk to that guy? And they said, oh, yeah, go-- go see that guy. And they show me some screenshots. And so here's what a behavioral economist thinks about. They had-- somebody had decided that the plans should be. grouped into categories and the categories.

should get labels of metals like platinum, gold, silver, bronze. JON STEWART: Oh. Sell it like timeshares. RICHARD THALER: And so I said, why-- why? Why should we do this? And I never got an answer what the theory was for why--. JON STEWART: I think the theory is like credit cards. Like, you get a platinum, you get a black card, you get a--. RICHARD THALER: Right, but the--.

JON STEWART: One is basic. One has got some frills. The other is free drinks and food, you know. RICHARD THALER: Right, but then down at the bottom, there was another category. And it didn't get a metal. It was called catastrophic. JON STEWART: Mm. RICHARD THALER: I said, wait a minute. So a catastrophic policy is one with a high deductible. JON STEWART: It only helps if you-- really, if the shit hits the fan. RICHARD THALER: Yeah. But economists-- a lot of economists would say, that's probably the most efficient policy.

But my comment to these guys was, wait, you're not calling one of the brands catastrophic, right? We've got platinum, gold, bronze. Catastrophic? And they said, yeah, well, that's what. economists call those plans. JON STEWART: But my comment would be, catastrophic is how I would categorize the choice. to treat health care like it's a product that companies.

like health insurers haven't already figured out how. to exploit for maximum profit to the detriment of. people who--. We always know people don't shop around for health care. Making it more transparent doesn't. mean they'll shop around. They want to live. They want to go to the best doctor. that they can who is nearest to them. Especially in an emergency, they don't get a choice.

And for us to continue to treat this as though it is some. functioning market that we can do our usual games of subsidies. and labeling to-- to-- to fix, that-- my point is. that's a market that needs a shove. RICHARD THALER: Yeah. OK. So I'm gonna make two points. JON STEWART: Yeah. RICHARD THALER: One is some friends of mine. and I ran a quick little experiment.

Simply changing the name of the catastrophic policy. to economy or value in our experiments. reduced the number of uninsured by 10%. That was good-- it's better to have--. JON STEWART: No, no, no, no, no. I'm not saying, there isn't goods to be had through that. RICHARD THALER: All right. That's point one. JON STEWART: But let me say this.

Are there still people who go bankrupt because they get sick? Have we fixed the problem that needs to be fixed? RICHARD THALER: No, we have not. No, we have not. JON STEWART: Are there still people that--. that--. RICHARD THALER: OK. All right, so here-- here's my--. so yes. I think--. JON STEWART: Don't let perfect be the enemy of good, is the point. RICHARD THALER: Yes. And if we're striving for perfect, you--.

you're absolutely right, Jon, that there. are vested interests, the hospitals, the insurance. companies, the doctors that don't want nurses to be. able to do a lot of stuff. And pharmacists are the most overtrained people. in the economy because they end up working in some.

God-awful Walgreens or--. JON STEWART: Right. Meanwhile, it's the benefit managers. that are making all the money because they're the middlemen. setting the prices. But if we allow ourselves to be satisfied. by these incremental positives and not let perfect. be the enemy of good, don't we lose sight of, don't let insane be the enemy of sane, or don't let sane be the enemy of insane? Like, if we have a system that is, like, blatantly insane,

aren't we-- yes, you make all these improvements. I'm not suggesting that there will ever. be anything that's perfect. But if we continue to accept such a broken and corrupted. system, as our only option is incremental improvements within. that, aren't-- aren't economists. and policymakers and everyone else.

robbing us of an opportunity? Because sometimes you need to--. to-- to view it on, not to go with the other terms. of economics, but the macro, not the micro. RICHARD THALER: Right. So what I would say is, Mark Cuban. has a little company that--. JON STEWART: Sure. It's very smart. RICHARD THALER: Very smart. JON STEWART: But why doesn't the government do that? RICHARD THALER: Well, because all of the vested interests.

JON STEWART: But that's my--. OK. RICHARD THALER: Well, but look. JON STEWART: That's my point. RICHARD THALER: OK, but look. Suppose you-- you say, Medicare for all. JON STEWART: Medicare for all that want it, yes. Great. RICHARD THALER: Right. So language matters. JON STEWART: Sure, having a system. that people can buy into. Anybody that wants to join a system so that you remove. the possibility of going bankrupt.

because you get sick, to me, is like the baseline. of a healthy society. RICHARD THALER: Well, so I would go further. JON STEWART: Yeah. Please. RICHARD THALER: My plan would be, if we're gonna start with something, I wouldn't start with that. JON STEWART: OK. RICHARD THALER: I would start with catastrophic insurance. for free for everyone. JON STEWART: OK. Now we're getting somewhere. That's what I'm--. I'm a behavioral economist! I'm with you, baby! RICHARD THALER: All right.

You've graduated. JON STEWART: Let's go, Mets! Let's go, Mets! Let's go, Mets! RICHARD THALER: Oh, he was so close. JON STEWART: [LAUGHS]. RICHARD THALER: He was-- he was almost there. So, we can't-- we can't ignore all the vested interests. JON STEWART: No, but they're the ones we should be nudging. and shoving, not consumers. I think we're always shoving on the wrong end of the horse. RICHARD THALER: Well, but the--. the problem is that there's--.

there's-- all those vested interests have lots of money. And they support both parties. And they-- they will make it difficult. JON STEWART: But that's the job of--. of-- of governments. I would say, here's what I would love for economists. And behavioral economists, I think, could play a big part in this, is to help us understand.

that the Founders looked at the system and said, there's gonna be a balance of power, checks and balances. between the executive and the judiciary and the legislative. But there's another power, and that's corporate power. And it's really the fourth branch of government. and maybe one of the most influential branches. And the only thing that we have in this country that. is powerful enough to in any way mitigate that. is the government.

And if the government refuses to take. a courageous stand in mitigating that damage, the damage of greed--. I remember Alan Greenspan was on my show. in, like, 2008, 2009. I asked--. RICHARD THALER: That must have been exciting. JON STEWART: Oh, it was--. I tell you-- he was only-- at that time. I think he was-- he was 98. He might have been 103 at that time. And I asked him, the financial crisis of 2008, like, what the hell happened? And he goes, I think we overested-- may--. I think we overestimated the bank's ability.

to regulate themselves. And I was like, do you mean you were idiots? 'Cause that's insane. RICHARD THALER: Well, you know, but we--. look, we-- we--. JON STEWART: [LAUGHS]. RICHARD THALER: The Fed--. the Fed is probably, you could argue, the best-functioning branch of the government. And certainly you can argue it's got the best--.

at least right now, best-trained. people working for them. And it's a well-functioning branch of the government. And that may all change. JON STEWART: [LAUGHS] I think--. I think-- I believe the plan is already in place to knock. down the East wing of the Fed. RICHARD THALER: You know, we have a mutual friend, Austan Goolsbee.

JON STEWART: Oh, I love the Goolsbee! Love them! RICHARD THALER: And he's the president of the Chicago Fed. JON STEWART: Come on. I love Goolsbee. Yeah. Tell him I said, hello. Tell him to come on this show. RICHARD THALER: I'm sure-- well, right now--. JON STEWART: He's in the Fed. He's not allowed to talk much. RICHARD THALER: Yeah. And anyway--. JON STEWART: That's tough on him. He's funny-- he's actually really funny. RICHARD THALER: No, he's very funny. JON STEWART: Yeah. Nah, I like Goolsbee. RICHARD THALER: So where were we? You know, the--.

JON STEWART: We were tearing down. the fabric of capitalist institutions. and reforming them, too. All right. RICHARD THALER: The problem is, we. wouldn't know where to start. And there is just--. if Mark Cuban can't do it, I mean, just any one step-- so, like, my version of free catastrophic for all, I think, is a good place to start. But it wouldn't eliminate the power of the American Medical.

Association to limit what physicians' assistants can do. and the insurance companies and--. JON STEWART: I understand. RICHARD THALER: --all the benefit. managers and all the layers. I-- it's above my pay grade to think about--. JON STEWART: No, I understand. And you know what? It's a great place, I think, to--. and I've so appreciated your time and your office hours. You've been so generous with them.

And, you know, I was taking this thing pass/fail anyway, so the idea that you gave me all this time--. RICHARD THALER: No, no, I don't allow pass/fail. JON STEWART: What? RICHARD THALER: No, no. JON STEWART: Oh, then I'm not going near you, man. RICHARD THALER: But, you know, there's grade nondisclosure. JON STEWART: That's where I'm at. Let's do that. Let's do that. RICHARD THALER: Yeah. OK. JON STEWART: But I think the point that I think maybe. I love coming to is this. I love the idea of those really smart, incentivized nudges.

and those things, but not allowing. that to remove our higher aspiration of actually looking. at the logistics and the guts of something. and-- and getting systems that are not as exploitative, that government has to have a larger. role in mitigating the damage. Look, capitalism is the operating system we have.

But it's clearly not a free market. It's intervened in by governments and all kinds. of other corrupt actors and the crony capitalism. that goes along with it. And my point is, let's continue to do those really smart things. that you're talking about. But we cannot lose sight of the larger goal, which is to--. that a government has to be there to help mitigate. the collateral damage that the operating system we've. chosen to use often creates.

RICHARD THALER: Yeah. And we need another show, Jon, to figure out how to get there. JON STEWART: Oh, but we will. We can. Yes, we-- the audacity of hope, baby. RICHARD THALER: Yeah. Yeah. JON STEWART: [LAUGHS] You're a good man. Professor, thank you for-- for joining us. Professor Richard Thaler, University of Chicago. and one of the founding fathers of behavioral economics.

The 2017 Nobel Prize in Econ, which. is sitting on Donald Trump's fireplace mantel as we speak. RICHARD THALER: But is up for sale. JON STEWART: Up for sale. RICHARD THALER: Up for sale for the highest bid. JON STEWART: Whoever wants. You know what? And you can get that and a Cornell mug, I'm assuming, for just $7 more. RICHARD THALER: Or a Nudge mug. There you go. JON STEWART: [LAUGHS] Excellent product placement.

Thank you so much, Professor. RICHARD THALER: Thank you, Jon. Pleasure to meet you. JON STEWART: Pleasure to meet you, too. [ROCK MUSIC]. Hey, folks, it's Quince time. Today's sponsor, Quince, helps you forget about all. the fashion nightmares. Quince, they bring together the premium. materials, the thoughtful design, the quality. You stay warm. You look sharp. You feel your best. Each piece, made from premium materials. by trusted factories that meet rigorous standards. for craftsmanship and ethical production.

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Free shipping and 365-day returns. Quince.com/tws. [ROCK MUSIC]. Man! My favorite part of the interview, if I may, was how slowly he talked to try and--. I really felt like it was--. I think he was about, like, 10 minutes into it when he was. like, hmm, I'm gonna have to change my tact here. because little brain is not--. [LAUGHS] GILLIAN SPEAR: No.

LAUREN WALKER: Yeah, I don't think he was. expecting that conversation. GILLIAN SPEAR: My favorite part was when he psychoanalyzed you. I think that was the first time that's happened on the pod. JON STEWART: That is right. LAUREN WALKER: Oh. JON STEWART: I gotta tell you, though, I thought he--. he kind of fucking nailed it. GILLIAN SPEAR: I mean, they don't give out Nobel. prizes for nothing, you know. [LAUGHS]. JON STEWART: No, I thought he--. I thought he did an excellent job. Did any of that resonate, though, with you guys? I think-- I get where he's coming.

from with that idea of, like, don't let. perfect be the enemy of good. But I don't know that they-- if-- it's not. to suggest that incrementalism isn't. still a part of the equation. LAUREN WALKER: Of course. JON STEWART: But I don't know if they. understand the general frustration within the public. GILLIAN SPEAR: 100% percent. LAUREN WALKER: I thought it was incredibly illuminating. that a conversation about health care, his grievance. or what his brain went to was the categorization. of shitty plans. JON STEWART: Yes.

Yes. LAUREN WALKER: Like, not having those categories, explaining in really big print exactly what these plans do, does not mean they don't all suck still. [CHUCKLES]. GILLIAN SPEAR: Yeah, I think it's like--. so if economists argue that you should choose the catastrophic. plan because that would be optimal, and then behavioral economists argue we need. to change the name because--. because people aren't choosing the most optimal plan, then we need to find someone that will argue. that the problem is actually, the most optimal plan.

is a plan that you will go broke if you need to use. Like, that's the real problem here. JON STEWART: That's what I was just. trying to explain, like, aren't you just, like, polishing turds at that point? [LAUGHTER]. But I mean, I get his point that there is, like--. you did help some people. GILLIAN SPEAR: Yeah, absolutely. JON STEWART: But I think sometimes that gives you. license to ignore the larger totality of climate. change, health care, of--. by incrementalizing, you also are forgetting that you.

have to maximize as well. GILLIAN SPEAR: Big, structural change. JON STEWART: Thank you. LAUREN WALKER: Well, I was thinking. a little bit when you were bringing up the subsidies. That's a shove, right? And if we just think about the subsidy itself, this-- a shove is even small in comparison. to what we should be doing. We take away the subsidy. 1.5 million people drop out of the ACA marketplace. Those are the people who are young, who are holding up the system for, like, the 5% of people.

who are really using it. But the whole thing's gonna start crumbling. because of this shove that was supposed. to be a fix, which it's not. JON STEWART: That's right. That's right. I almost think he would still categorize. subsidy as, like, a nudge, and the shove. would be the redesign of it. But they don't-- boy, I thought he. got really, like-- that was where he was, like, uncomfortable. Like, you can't bring your weight on insurance companies. That's not right. BRITTANY MEHMEDOVIC: His pauses got longer in those moments.

[LAUGHS]. JON STEWART: He just got sad. That's when he went to, like, you're a Mets fan, aren't you? [LAUGHTER]. But anyway, man, I thought that was--. I thought he was really interesting and very, very. illuminating, I think, for me. What about-- Brittany, what have we got for the listeners. there? What do they got there? What do they want? BRITTANY MEHMEDOVIC: Alrighty. First up, we've got, "Jon, of all. the Trump news this week, which development. worried you the most?". JON STEWART: Oh. I think the election.

You know, with all the--. the elites are gonna get out of everything. I'm accustomed to, as we said on the show. last night, the real sanctuary city in this country, which. is this privileged class that there is. no crime they can commit that would have any kind. of accountability to it. But it was the-- the--. the raid on the Fulton County Electoral Board, along with his offhand remark about nationalizing.

the election only in, I think, the 15 states. that caused him a problem. BRITTANY MEHMEDOVIC: Yeah. GILLIAN SPEAR: I'm just spitballing here, but what if we nationalize the elections in the 15 states. that caused me a problem? JON STEWART: Right. I mean, he's gonna end up tariffing states. BRITTANY MEHMEDOVIC: Oh, sweet Lord. LAUREN WALKER: And this was, like, a small, related situation, but he. actually called Tulsi Gabbard after assigning. her that mission. Trump was just on the phone with her. while they're doing it. JON STEWART: Why is he even assigning her anyway? What the fuck is the President assigning the DNI to an FBI--.

he's not supposed to be assigning the FBI to stuff. They're supposed to be independent. LAUREN WALKER: Yeah. And she's also under some top-secret investigation. while this is all going on. The whole thing's a mess. But I agree with you. JON STEWART: Wait. Do you know what the investigation-- what is--. LAUREN WALKER: No, no, it's top-secret. It's, like, locked away so that even Congress doesn't know. 'cause they don't want it to get out. BRITTANY MEHMEDOVIC: It's in a safe. JON STEWART: I bet it's about the streak, the streak in the hair. LAUREN WALKER: Oh, don't talk about people's gray streaks. JON STEWART: No, no, no, no, no, no, no.

It's the-- people are gonna say, what is that? What is-- that's clearly a-- she's. giving a sign to somebody. LAUREN WALKER: Yeah, we hold our secrets in them. JON STEWART: Is it Putin? Is that who we're--. yeah, no, I agree with you. And-- and the problem is you don't ever think--. there'll be no accountability for any of them. in the first place anyway. So they're operating under, as they would say, as JD Vance would say, absolute immunity, which. is fucking ridiculousness. What else-- what else do they want? What else do these viewers, listeners--.

BRITTANY MEHMEDOVIC: "Why can Trump threaten to sue. everyone for a gazillion dollars, but no one can sue him back?". [LAUGHTER]. JON STEWART: That is a Zen koan. That is-- I think I might have that. That was a-- I believe that might. have been a fortune cookie that I got the other day. That's one of those-- the Buddhists will go. to a monastery and they will sit. there in silence for years, pondering. the question of, why Trump--.

Now, to be fair, no one has been sued more than Donald. Trump, in my estimation. Like, if you go through his construction records, every fucking contractor he's ever worked with is like, uh, hey, man, you still owe me 15% of the money. And he's like, come and get me. BRITTANY MEHMEDOVIC: [LAUGHS] Try it. GILLIAN SPEAR: He's a victim. Yeah. JON STEWART: Poor, poor, sweet, billionaire president. Ooh. LAUREN WALKER: There have been some recent suits, but I think that--. I mean, he's making so much money off the presidency,

could probably go on forever. JON STEWART: He's killing it. LAUREN WALKER: Whereas people can't. afford to continue the suits. JON STEWART: Oh, they've got--. I mean, the Supreme Court made it basically so. that, like, he-- no matter what he does, it's sort of in the guise of his presidential duties. You're not even allowed to do discovery. I think part of why you can't sue. him is, like, I'm suing you. Great. What evidence do you have? Well, I'd like to see your emails. Boy, I'd love to, but I don't--.

I don't have to. But his-- it's interesting. The-- the-- the mindset that he had as running Trump. Enterprises is the same as he has. when it comes to be president. It's the exploitation he did, like, on all of his contractors. Everybody-- people don't realize, like, so many contractors in New York City fucking. hate that guy 'cause his-- his whole strategy was, I'll pay you just enough money to satisfy a certain portion. of the contract. But I won't pay you the final 10% or 15%,

knowing that you as a small contractor, the hassle. and money it will take you to try and recoup. that won't be worth it. And so I will get myself 10% to 15% off of everything. that I do. GILLIAN SPEAR: That's behavioral economics, right? BRITTANY MEHMEDOVIC: Ha. JON STEWART: Gillian Spear tying the whole show together. GILLIAN SPEAR: We're tying it all together. JON STEWART: One more. One more question. BRITTANY MEHMEDOVIC: Alrighty. "Jon, which Super Bowl halftime show will you be watching, Bad Bunny or Kid Rock?".

JON STEWART: Puppy Bowl. [LAUGHTER]. GILLIAN SPEAR: There's already counterprogramming, if only Turning Point USA now. JON STEWART: No. I always watch the Super Bowl halftime show. I don't particularly care who's on it. A, it's a continuity issue, behavioral economics, status-quo thinking. LAUREN WALKER: Nice. Inertia. JON STEWART: I feel bad for, like--. I feel bad for--. not bad, but I mean, he's a superstar, but Bad Bunny. Like, the shit this guy's take-- he. reaches the pinnacle of his professional career. and a kind of global superstar to get the opportunity.

to do a halftime show. The guy's clearly a fucking extraordinary musician. and entertainer who's earned this place. And the idea that he's facing a backlash--. my favorite backlash to it is, you gotta get. a fucking American in there. And you're like, uh--. BRITTANY MEHMEDOVIC: Yeah. GILLIAN SPEAR: Read a fucking book. JON STEWART: Right? LAUREN WALKER: Ay, ay, ay. JON STEWART: The Gillian sigh tells us all we need to know. GILLIAN SPEAR: It drives me crazy. I love Bad Bunny. Like, aw, he's gonna kill it. I can't wait. BRITTANY MEHMEDOVIC: Benito. GILLIAN SPEAR: That's why I'm tuning in.

BRITTANY MEHMEDOVIC: I'm so excited. GILLIAN SPEAR: The game's gonna be a blowout. BRITTANY MEHMEDOVIC: He's wonderful. He just won two Gram-- three Grammys Sunday night. Plus, he's really hot, so--. JON STEWART: Really? GILLIAN SPEAR: He has Kid Rock beat in that element, for sure. JON STEWART: Wait, so the Bad Bunny. also has a little bit of a machismo, a little bit of a vibe going? BRITTANY MEHMEDOVIC: Oh, yeah. JON STEWART: Interesting. But to be a musician versus a comedian-- this comedian--. it's never done about comedians.

It's always musicians. People love the-- it's something with the--. the hips not lying. BRITTANY MEHMEDOVIC: [LAUGHS]. JON STEWART: Well, listen. Very, very lovely, guys. Thank you, once again. Brittany, how do they stay in touch with us, for all this? BRITTANY MEHMEDOVIC: Twitter, we are WeeklyShowPod. Instagram, Threads, TikTok, Bluesky, we. are WeeklyShowPodcast. And you can like, subscribe, and comment. on our YouTube channel, The Weekly Show with Jon Stewart. JON STEWART: And Instagram, baby, if you wanna. see all of my nasal pores. [LAUGHTER]. Join-- join me on my page.

Thank you guys so much. Lead producer Lauren Walker, producer Brittany Mehmedovic, producer Gillian Spear, video editor and engineer. Rob Vitola, audio editor and engineer. Nicole Boyce, executive producers. Chris McShane and Caity Gray. We will see you guys next time. [ROCK MUSIC]. The Weekly Show with Jon Stewart. is a Comedy Central podcast. It's produced by Paramount Audio and Busboy Productions.