This is the Cato Daily Podcast for Tuesday, January 22nd, 2008. I'm Caleb Brown.

Humans aren't purely rational. That insight probably comes as no surprise to most people, but just how rational

to humans have to be for the marketplace to function well.

Michael Sherman tackles that and other questions in the mind of the market, compassionate

apes, competitive humans, and other tales from evolutionary economics.

We spoke following a book forum January 11th.

You know, in reading your book, it reminded me of some conversations that I've had with people.

There's a sort of gotcha that people like to play, especially among those who have some sort of hostility

toward capitalism, the coldness of it.

When they get wind that humans are not purely rational, that much of our decision-making is

spurred by emotional responses rather than our calculating mind.

Your book is filled with examples of it, but that whole and rational choice theory does have a

lot of currency with people could you respond to that? Well the fact that we're

emotional in our decisions doesn't mean we shouldn't at least try to make rational decisions and

The one part of the book that I rather enjoyed writing was the section on

Libertarian paternalism. This is Dick Thaler's idea, Kast Sunstein's idea of

when you give people a choice, say you're a corporation, and you give your employees a choice of health care plans to pick from or retirement plans to choose from, well you can't give them an infinite number, and so why not give them,

paternalistically speaking, the, you know, six best plans that there are out there,

as judged by you and your experts that you've hired to advise you on that and then they can freely

pick.

So in a way I guess when we structure society we do it such that we want to maximize freedom

and free choice and yet we can't provide every single choice in the

...