The Royal Swedish Academy of Sciences awarded the 48th Nobel Memorial Prize in Economic Sciences on October 9th, 2017 to Richard Thaler, a Professor of Behavioral Economics at the Booth School of Business, University of Chicago. Thaler was awarded the prize for his vital contribution in the development of “Behavioral Economics”, since he has provided a “more realistic analysis of how people think and behave when making economic decisions.” In other words, he creates a linkage between economic and psychology to interpret the decision that had been made by individuals.
Thaler “made economics more human” according to the Nobel Committee. His findings contradict with the classical economics assumption that assumes that economic agents are always rational, and that decision-making process is always based on logical thinking. Thaler found that most of decisions people take don’t serve their best interest, starting from simple purchases of commodities or stocks, and ending with planning for their retirements. Therefore, Thaler suggested that the economic policy makers should take into consideration people’s illogical and irrational thinking when design and implement policies.
Thaler also worked on “Nudge Theory”, which meant to develop positive reinforcements that influence the motivates, incentives, and the decision making of groups or individuals. Nudge theory has many applications in economic, political and behavioral sciences, that have helped millions to quit smoking, created a surge in organ donations, in addition of increasing the amount of taxes collected by governments through adjusting tax reminder letters according to behavioral economic principles.
Thaler received his bachelor's degree from Case Western Reserve University in 1967, his master's degree in 1970 and his PhD in 1974 from University of Rochester. He started his career path as professor at the University of Rochester, then he moved to Cornell University, before moving on to University of Chicago since 1995. Currently, he is the director of the Center for Decision Research, the co-director of the Behavioral Economics Project at the National Bureau of Economic Research since 1991, and a Principal of Fuller & Thaler Asset Management since 1999.
He published many books and articles in the topic of behavioral finance and economics, including one of the global best-selling books: “Nudge: Improving Decisions about Health, Wealth and Happiness” in 2008 (with Cass Sunstein). Other books include “How Much is Investor Autonomy Worth?” in 2002 and (with Shlomo Benartzi) “The Winner's Curse: Paradoxes and Anomalies of Economic Life” in 1992. In addition of being a columnist at some points in his career, writing regular column for the Journal of Economic Perspectives during 1987-1990 entitled “Anomalies”. He also published several articles in well- known journals like American Economics Review, the Journal of Finance, and the Journal of Political Economy.
Read more on Richard Thaler and comments on this year’s Nobel Prize in Economics at: