Economist, who explains why we’re irrational, bags Nobel

The Nobel prize in economics has been awarded to Richard Thaler of the University of Chicago for research showing how people's choices on economic matters — whether on savings or game shows like "Deal or No Deal" — are not always rational.

The $1.1-million prize was awarded to the academic for his "understanding the psychology of economics," the Swedish Academy of Sciences said Monday.

Thaler is considered one of the founding fathers of behavioral economics, a field that shows that far from being the rational decisionmakers described in economic theory, people often make decisions that don't serve their best interests. That could include, for example, refusing to cut their losses when their investments plunge in value or making big bets at the casino because they are convinced their hot streak will continue. The illogical behavior has economic consequences: People don't save enough for retirement. They make investments — in houses in the mid-2000s, for instance, when prices are already dangerously high.

The Nobel committee said Thaler has provided a "more realistic analysis of how people think and behave when making economic decisions."

Speaking by phone to a news conference immediately after he was announced as the prize winner, Thaler said the most important impact of his work is "the recognition that economic agents are humans."

In 2015, Thaler had a cameo alongside pop star Selena Gomez in the film "The Big Short," about the global financial crisis. In the scene, he explains the "hot hand fallacy," in which people think whatever's happening now is going to continue to happen into the future.