Early in his career, the economist Richard Thaler made a list of “Dumb Stuff People Do” on his office blackboard, said Tim Harford in the FT. A favourite example was the way guests at his dinner parties invariably “hoovered up” cashew nuts over drinks. In principle, they could have chosen to stop. Most didn’t. And yet they were mostly “pleased to see the temptation removed”. Thaler, who has just won the Nobel Prize in Economics, wasn’t the first to apply seemingly trivial psychological insights to argue that humans rarely behave as rationally as traditional economic models assumed. But his book Nudge (co-authored with Cass Sunstein), and his work in government policy units, put bones on his theories. Thaler’s win is “a triumph for common sense economics”.
A genial, witty academic, who made a cameo appearance in the 2015 film The Big Short, Thaler has spent his career exploring how to incentivise people out of shooting themselves in the foot, financially or otherwise, said The Daily Telegraph. His work inspired former PM David Cameron to set up a “Nudge unit”, where the stakes were much higher than cashew nuts. The biggest success was private sector pensions. The simple expedient of enrolling people on a scheme by default, while allowing them to opt out, boosted take-up from 42% to 73% in four years. After the $1m prize was announced, Thaler, a professor at the University of Chicago and a keen golfer, said he would try to spend the money “as irrationally as possible”.