… behavioural scientist Richard Thaler.
Even if not directly part of the Alfred Nobel heritage, but established in his memory in the late 1960s and sponsored by the central bank of Sweden, the Sveriges Riksbank Prize in Economic Sciences is awarded at the same time and according to the same principles as the annual prizes for the five other original categories (Physics, Chemistry, Physiology/Medicine, Literature and Peace), i.e. to laureates who, citing Nobel, “shall have conferred the greatest benefit to mankind”. In this context, Richard Thaler is awarded the 2017 prize for his contributions to behavioural economics over the past four decades: reshaping economic theories by taking insights from human psychology into economic analysis.
In its nomination statement, the committee of the Royal Swedish Academy of Sciences outlined Thaler’s work as having had “a significant cumulative impact on the economics profession”, inspiring many other researchers “to develop formal theories and empirical tests, which helped turn a somewhat controversial, fringe field into a mainstream area of contemporary economic research”.[1]
Are humans really rational actors? How rationally do they behave? How much are we impacted by cognitive limitations? Thaler’s research on the influence of psychological aspects on economic decisions and individual decision-making is centered around what he calls the “three bounds”: bounded rationality, bounded willpower, bounded self-interest. A selection of his theories (such as mental accounting, the endowment effect, the planner-doer model, social preferences etc.) indeed shows that humans do not act as rationally as the homo oeconomicus concept might suggest, but that we often instead follow simple decision patterns or rules of thumb when our brainpower, time or self-control capacities are limited – even if this might lead to suboptimal results. Together with Cass Sunstein, Richard Thaler is also the co-founder of the nudge theory which builds on using behavioural insights in public-policy making in order to improve decision-making in the interest of citizens’ concerns.[2]
And what will Richard Thaler do with his prize money? When he was asked the question by the New York Times (NYT, October 9th 2017)[3], he replied: “This is quite a funny question. I will try to spend it as irrationally as possible.”
KATHRIN MEIER
[1] “The Prize in Economic Sciences 2017 – Scientific Background: Richard H. Thaler: Integrating Economics with Psychology”. Nobelprize.org. Nobel Media AB 2014. Web. 13 Oct 2017
[2] See previous article on RTT
[3] https://www.nytimes.com/2017/10/09/business/nobel-economics-richard-thaler.html?smid=tw-share
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