This month, the Nobel prize for economics was awarded to Richard Thaler, professor of economics at the University of Chicago, for his seminal contributions to behavioral economics. With this prize, Thaler joins Daniel Kahneman (Princeton, Nobel laureate 2002) and Robert Shiller (Yale, Novel laureate 2013) in making the world take notice what most of us have long suspected – that our brains are prone to making major errors of judgement – often repeatedly, as if we never learn. Such errors are called behavioral biases or cognitive biases. I will simply called them biases.
Most of us go through life focusing more on our immediate needs (or is it wants?) than for future goals like saving for retirement. This bias is aptly called the present bias. People with the present-bias don’t think much about their future selves, or if they do, they think of their future selves as a stranger.