Behavioral finance presented here is a second generation behavioral finance. The first generation, starting in the early 1980s, largely accepted standard finance’s notion of people’s wants as “rational” wants – restricted to the utilitarian benefits of high returns and low risk. That first generation commonly described people as “irrational” - succumbing to cognitive and emotional errors and misled on their way to their rational wants.

The second generation describes people as normal. It begins by acknowledging the full range of people’s normal wants and their benefits - utilitarian, expressive and emotional - distinguishes normal wants from errors, and offers guidance on using shortcuts and avoiding errors on the way to satisfying normal wants. People’s normal wants, even more than their cognitive and emotional shortcuts and errors, underlie answers to important questions of finance, including saving and spending, portfolio construction, asset pricing, and market efficiency. These are presented in this book.

We want more from our investments than the utilitarian benefits of wealth. We want the expressive and emotional benefits of hope for riches and freedom from the fear of poverty, nurturing our children and families, being true to our values, gaining high social status, playing games and winning, and more.


Finance for Normal People

My book, Finance for Normal People, has just been published by Oxford University Press and is available from Amazon and other booksellers.


Learn More

Fix The U.S. Retirement System

Even in these deeply polarized times, you won’t get much pushback saying that America’s retirement system is flawed.


Learn More

Retirement Income

Discussions about retirement income are unfocused because they blur distinctions between the wealthy and the poor, and between the stable-middle and the precarious-middle.

Full Video