Nobel Prize 2017: Richard H. Thaler Wins Nobel for Economic Science

Jon Howard
October 11, 2017

USA academic Richard Thaler, who helped popularise the idea of "nudging" people towards doing what was best for them, won the 2017 Nobel Economics Prize on Monday for his work on how human nature affects supposedly rational markets.

Thaler developed the theory of "mental accounting", explaining how people simplify financial decision-making by creating separate accounts in their minds, focusing on the narrow impact of each individual decision rather than its overall effect.

In 2001, Thaler along with Shlomo Benartzi of the UCLA Anderson School of Management, addressed the issue of using behavioral economics to increase employee saving.

Thaler, a professor of behavior science and economics at the University of Chicago, took home one of the most prestigious prizes in the field of economics for his contributions to the study of incorporating "psychologically realistic assumptions into analyses of economic decision-making".

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Thaler co-authored a book with Harvard's Cass R. Sunstein called "Nudge: Improving Decisions about Health, Wealth, and Happiness".

"I don't know about you, but I'm nervous, and it seems like when investors are nervous, they're prone to being spooked", Mr. Thaler said, "Nothing seems to spook the market" and if the gains are based on tax-reform expectations, "surely investors should have lost confidence that that was going to happen". It was not part of the original group of awards set out in dynamite tycoon Nobel's 1895 will.

While Americans have dominated the Nobel science and economics prizes, another category of researchers - women - have been few and far between. The Royal Swedish Academy of Sciences noted that Thaler, in his applied work, demonstrated how nudging may help people exercise better self-control when saving for retirement, as well as in other contexts.

The last of the Nobel prizes to be awarded this year is something of an outlier — Alfred Nobels will didnt call for its establishment and it honors a science that many doubt is a science at all.

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