University of Chicago professor Richard Thaler has won the 2017 Nobel Prize in economics for his work on behavioral economics, which tries to understand how humans make decisions, especially bad ones.
Thaler, an American, is one of the leading experts in the relatively new field that combines psychology and economics. He has made a career of studying people's poor choices — everything from why people save so little for retirement to why National Football League teams that go early in the annual draft typically do a poor job of selecting new players. He's even looked at how to make bathroom floors cleaner.
“We Americans eat too much, take on too much debt, save too little and put off anything mildly unpleasant as long as possible,” Thaler wrote in a New York Times op-ed in 2011.
Humans prefer instant gratification right now, even if they know that being patient would yield them more money or a better life down the road, Thaler found. He earned his PhD in economics at the University of Rochester in 1974 and appeared briefly in the 2015 film “The Big Short.”
“He is a pioneer on integrating economics and psychology,” the Nobel committee said Monday as it announced the prize. “He’s made economics more human.”
The committee praised Thaler for trying to “nudge” people and companies to make better decisions. In addition to his scholarly papers and books, Thaler has written many commentaries over the years. In one, he scolded Congress for extending tax cuts for the wealthy. In another, he advocated automatically enrolling Americans in retirement savings accounts.
Nudge is the title of Thaler's 2008 bestselling book, “Nudge: Improving Decisions about Health, Wealth and Happiness,” written with Harvard Law School professor Cass Sunstein. They have a Nudge blog as well.
“My mantra is if you want to get people to do something, make it easy," Thaler said Monday in an interview from his home posted by the University of Chicago.
He pointed to financial aid forms. They are notoriously hard to fill out and dissuade some students from going to college. Thaler said the federal government could change that easily by using technology to auto-fill many of the fields on the application form.
Many economists applauded the decision to award Thaler the world's top prize in the field. Paul Krugman, a New York Times columnist and winner of the 2008 Nobel Prize in economics, tweeted, "Yes! Behavorial econ is the best thing to happen to the field in generations, and Thaler showed the way." Economist Tyler Cowen of George Mason University called it "well deserved."
The main critics of Thaler's work are libertarians who don't like the idea of the government nudging anyone to do one thing or another.
Some in India were critical of the decision to give the prize to Thaler. They had hoped the prize would go to Raghuram Rajan, former head of the India's central bank and a well known financial markets scholar. Thaler had also praised India's attempts to become a cashless society, a move that remains controversial.
The Nobel Prize in economics is not one of the original prizes established by Alfred Nobel in the late 1800s. It was added in 1968 after a donation by the Swedish National Bank, and first awarded the following year. Most of the winners have been men from the United States or Western Europe.