‘Nudge’ theorist wins Nobel for theories of how we decide
“I think the most important impact [of my research] is the recognition that economic agents are human and economic models have to incorporate that.”
STOCKHOLM — U.S. academic Richard Thaler, who helped popularise the idea of “nudging” people towards doing what was best for them, won the 2017 Nobel Economics Prize yesterday for his work on how human nature affects supposedly rational markets.
Influential in the field of behavioural economics, his research showed how traits such as lack of selfcontrol and fear of losing what you already have, prompt decisions that may not have the best outcome in the longer term.
“I think the most important impact [of my research] is the recognition that economic agents are human and economic models have to incorporate that,” Thaler, a professor at the University of Chicago Booth School of Business, said in a call broadcast at the Nobel news conference.
Awarding the nine million Swedish crown (R15,3 million) prize, the Royal Swedish Academy of Sciences said: “Richard Thaler’s contributions have built a bridge between the economic and psychological analyses of individual decisionmaking.
“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioral economics, which has had a profound impact on many areas of economic research and policy.”
Thaler brought to prominence the idea of “nudge” economics, where individuals are subtly guided toward beneficial behaviours without heavyhanded compulsion, the theme of a 2008 book he cowrote which caught the eye of policymakers around the world.
In researching selfcontrol — or the lack of it — Thaler touched on an ageold problem: why New Year’s resolutions to change aspects of your life are notoriously hard to keep. The issue has relevance for economics as individuals’ tendency to fall prey to temptation often negatively affects plans to, for instance, save for retirement.
Together with Professor Cass Sun stein, he argued that society — while maintaining freedom of choice — should actively try to guide individuals in the right direction.
Their book, titled Nudge: Improving Decisions about Health, Wealth, and Hap
piness, became popular with some Western politicians seeking ways to encourage their citizens to save and live healthily, without incurring voters’ wrath for raising taxes or banning behaviour outright.
“This has also been used in public pension systems in the United States and the general idea of ‘nudging’ ... has made a breakthrough in public policy making,” Torsten Persson, economics prize committee member, told Reuters.
David Laibson, chair of Harvard University’s economics department, said many of Thaler’s theories have been widely applied by business and government, aiming to get individuals to do a range of actions such as paying parking tickets and getting flu shots.
“If you live in a developed country, there’s some firm or entity that has read these ideas and started to affect your life,” Laibson said.
U.S. academic Richard Thaler, winner of the Nobel prize in Economics.