‘Nudge’ the­o­rist wins No­bel for the­o­ries of how we de­cide

The Witness - - NEWS -

“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.

PHOTO: EPA

U.S. aca­demic Richard Thaler, win­ner of the No­bel prize in Eco­nom­ics.

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