Richard Thaler Has Reshaped Economics

Richard Thaler Has Reshaped Economics

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017, popularly known as the Nobel Prize for economics, has been awarded to Richard H. Thaler for his contributions to behavioural economics. Thaler is the second behavioural economist & scientist to win the Nobel prize after Daniel Kahneman won it in 2002 for having integrated insights from psychological research into economic science.


Behavioural economics, at its simplest, is incorporating psychology in the study of economics and economic decision-making. While Amos Tversky and Daniel Kahneman can easily be called the fathers of behavioural economics, Thaler's work has truly transformed behavioural economics into behavioural science.


Richard Thaler, 72, is currently Professor of Economics and Director of the Center for Decision Research at the University of Chicago Booth School of Business. He is a Research Associate at the National Bureau of Economic Research (NBER), an American private nonprofit research organization. He is also on the Academic Advisory Panel of the Behavioural Insights Team (BIT), a social purpose company jointly owned by the UK Government.


Thaler's first behavioural paper 'Toward a Positive Theory of Consumer Choice' (1980) was rejected by multiple journals, his doctoral dissertation 'The Value of Saving A Life: A Market Estimate' (1974) was unimpressive even to his supervisor, and many years later his appointment to University of Chicago was shrugged off as mistakes of a generation by the Nobel laureates associated with the university at that time.


The Nobel Prize committee has recognised his work on three areas: limited rationality, social preferences, and lack of self-control. His proposals and experiments have been termed as ground-breaking. Richard's work such as his Model of Mental Accounting has transformed the way Americans save money and his experiments on Judgements of Fairness (along with Daniel Kahneman) show systematic deviations in the assumed human behaviour as selfish or rational. Behavioural finance too has seen revolution, where Thaler along with his other colleagues has shown investors have a tendency to stick with their poor assets and how they can change this, through the concepts of Endowment Effect & Loss Aversion.



Chicago Booth's announcement of Thaler's award is the most accurate and easily understood: 

He investigates the implications of relaxing the standard economic assumption that everyone in the economy is rational and selfish, instead entertaining the possibility that some of the agents in the economy are sometimes human.


Behavioural Economics (& Science) which struggles even today to find credibility amongst some intellectual circles and is disbelieved as a subject of 'obvious common-sense' to the general public, was a social science much ahead of its time in the early 70s when Kahneman, Tversky and Thaler nursed and ruled it.


With Richard Thaler's Nobel comes a lot of noise (in the form of celebration of his work and of the science): a great deal written by the scholars of BE and the value that it has created has resurfaced, which is likely to generate momentum for this underdog, get it the front seat in the policy circles of more countries and motivate more economists to opt for this economics of experiment based policy making.


Thaler will receive 9 million Swedish kronor as prize money and he says that he will "try to spend it as irrationally as possible."

Share this article

Leave your comments

Post comment as a guest

terms and condition.
  • Hocine Zahraoui

    Despite the harsh criticism that he received, he deserves this nobel prize award.

  • Shaswata Chatterjee

    We are not that rational, I really agree with him :D

  • Kevin James

    I really wanna know more about behavioural economics

  • Patrick Vargas

    I was surprised when I saw him winning the Nobel Prize

  • Letícia Miller

    If states provide us incentives and let us know the pros and cons, we will surely make better decisions instead of being forced to follow whatever path or decision.

  • Kumar Mohit

    Congrats for winning the award ;)
    I have followed Professor Thaler for many years

  • Graeme Morris

    behavioral economics is on the rise

Share this article

Swati Thapar

Global Economy Expert

Swati is passionate about behaviouural economics and is proficient in digital media strategy & tactics. She has developed marketing, sales, online advertising & PR campaigns for major brands and public personalities. She holds a master degree in Economics from TERI University.

Cookies user prefences
We use cookies to ensure you to get the best experience on our website. If you decline the use of cookies, this website may not function as expected.
Accept all
Decline all
Read more
Tools used to analyze the data to measure the effectiveness of a website and to understand how it works.
Google Analytics