When should we nudge and when should we shove, I think, it's a political judgment. Obviously in some situations we need shoves, we need laws. Fraud is against the law, murder is against the law, drunk-driving is against the law. We don't need just nudges.

Retirement savings is probably behavioral economists' greatest success story. It is a prototypical behavioral-economics problem because saving for retirement is cognitively hard - figuring out how much to save - and requires self-control.

Recall that people like to do what most people think it is right to do; recall too that people like to do what most people actually do.

People exaggerate their own skills. they are optimistic about their prospects and overconfident about their guesses, including which managers to pick.

Rip Van Winkle would be the ideal stock market investor: Rip could invest in the market before his nap and when he woke up 20 years later, he'd be happy. He would have been asleep through all the ups and downs in between. But few investors resemble Mr. Van Winkle. The more often an investor counts his money - or looks at the value of his mutual funds in the newspaper - the lower his risk tolerance.

I think the people who've been the most overconfident in our business in the last decade have been the people that called themselves risk managers.

LTCM lost money when Russia defaulted on a certain class of bonds, and then they had other investments like on the spread between two different kinds of shares of Royal Dutch Shell Oil Company. Now that seems completely unrelated to Russian bonds. But they were related because other hedge funds saw similar discrepancies and they were all making similar bets.