Thaler gets Nobel for ‘making economics more human’

LONDON/BRUSSELS: Britain and its European Union partners clashed on Monday over which side should make the next move to unblock Brexit talks, despite concerns they will miss a deadline for a divorce deal and that London is heading for a chaotic departure.

Prime Minister Theresa May made clear in a speech she delivered to parliament that she hoped her EU partners would make proposals at a new round of talks opening the way to the next stage of negotiations, saying “the ball is in their court”.

But even before she had delivered the speech, an EU spokesman hit back in Brussels, saying “the ball is entirely in the UK court for the rest to happen”.

May is desperate to try to regain some of her authority and refocus on talks to unravel 40 years of union after a speech at her party conference last week, marred by a repetitive cough, a prankster and a stage malfunction, left her weaker than ever.

She has so far fought off attempts to unseat her by critics already angry over an ill-judged election when she lost her governing Conservatives’ majority, but her weakness has opened the door for many in her party to challenge her Brexit strategy with just 18 months to go before Britain leaves the EU.

With Brussels quietly preparing for a collapse in the talks and Britain getting ready for what May calls “every eventuality”, some officials and business chiefs worry the country will crash out of the EU without a deal. STOCKHOLM: US economist Richard Thaler won the Nobel Economics prize on Monday for showing that economic and financial decision-makers are not always rational, but mostly deeply human.

Bridging the gap between economics and psychology, Thaler’s research focuses on behavioural economics which explores the impact of psychological and social factors on decisions by individuals or groups in the economy and financial markets.

“He’s made economics more human,” the Nobel jury said, calling Thaler “a pioneer” on integrating economics and psychology.

Thaler is well-known for cofounding the “nudge” theory, which demonstrates how people can be persuaded to make decisions that leave them healthier and happier.

“By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes,” the jury’s statement said.

“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many areas of economic research and policy.”

He has advised several governments, including in Denmark and France, and former British prime minister David Cameron set up a team in 2010 nicknamed the “nudge unit” to reshape a swath of policies to gently prod Britons to make the right decisions to make them healthier and happier.

His work even earned him a glamorous foray into the movie business when he made a cameo appearance, alongside Christian Bale, Steve Carell and Ryan Gosling, in the 2015 movie “The Big Short” about the credit and housing bubble collapse that led to the 2008 global financial crisis.

Thaler told the Nobel committee by teleconference he was “pleased” by the award.

“I no longer will have to call my colleague Eugene Fama ‘Professor Fama’ on the golf course,” he joked, referring to his University of Chicago colleague who won the prize in 2013.

“I think the most important recognition is that economic agents are human, and economic models have to incorporate that,” he said.

The 72-year-old takes home the nine million kronor ($1.1 million) prize sum, which he jokingly said he would “try to spend as irrationally as possible”.

Thaler is a professor at the University of Chicago — a school popular with the Nobel economics committee. Of 79 laureates so far, more than a third have been affiliated with the university’s school of economics.

One of the founders of behavioural finance, which studies how cognitive limitations influence financial markets, Thaler developed a model for explaining how people tend to focus on the narrow impact rather than the overall effect of each decision they make, which is called limited rationality.

This includes the study of how people’s loathing of losses can explain why they value the same things more when they own them as opposed to when they don’t, which is called the endowment effect.

Thaler illustrated that New Year’s resolutions can be hard to keep as short-term temptations disrupt people’s plans to save for their old age or rainy days.

“In his applied work, Thaler demonstrated how nudging — a term he coined — may help people exercise better self-control when saving for a pension, as well in other contexts,” the Nobel jury said.