Nobel Prize-Winning Psychologist Daniel Kahneman on the Boom-Bust Economic Cycle

Last month, I interviewed psychologist Daniel Kahneman, who won the Nobel Prize in economics in 2002 and recently authored the book Thinking, Fast and Slow.

In this clip, Kahneman and I discuss the psychology of the boom-bust economic cycle. (Transcript follows.)

Morgan Housel: Is the boom/bust cycle in the economy, to the extent that it's driven by optimism, is that something that we're never going to get over?

Dr. Kahneman: Well, to the extent that it's driven by optimism, you've answered your own question because I think human nature is not going to change radically, so the tendency to become optimistic when things are going well and pessimistic when things are going badly, that's certainly going to stay. It's my guess is that it will continue to affect decisions in the economic domain.

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