In the aftermath of the 2008 economic crisis, Alan Greenspan – the Fed Chairman who had presided over the collapse – admitted before a Congressional committee that he had been wrong about human nature. His aggressive pursuit during his tenure of financial deregulation, he said, was based on a belief that their own self-interest would drive banks and financial businesses to regulate their own behavior tightly.
As it happened, vast numbers of people took out mortgages they couldn't possibly afford to pay off and the financial industry instead took enormous risks that put the entire global economy in jeopardy.
Human decision-making is as extraordinarily complex and fallible as is the human mind, and self-interest is insufficient to explain it. Yet there is obviously a great deal to be gained from the study of how we tend to make decisions, and how we can make better ones.
Nobel Laureate Daniel Kahneman has devoted his career to mapping out the cognitive errors we're prone to. Harvard psychologist Steven Pinker offers an evolutionary explanation for irrational behavior. And Maria Konnikova shares lessons from the master decision-maker, Sherlock Holmes.