Ir­ra­tional spend­ing

Chattanooga Times Free Press - - BUSINESS -

An econ­o­mist known for study­ing the ir­ra­tional de­ci­sions peo­ple make with their money won this year’s No­bel prize in eco­nom­ics.

Richard Thaler of the Uni­ver­sity of Chicago won the 9-mil­lion-kro­nor ($1.1-mil­lion) prize this week for his work in a field he helped found called “be­hav­ioral eco­nom­ics.”

“He changed eco­nom­ics, and he changed the world,” said Har­vard Law School pro­fes­sor Cass Sun­stein, one of Thaler’s col­lab­o­ra­tors.

Far from be­ing the ra­tio­nal de­ci­sion-mak­ers de­scribed in clas­si­cal the­ory, Thaler found peo­ple often make de­ci­sions that don’t serve their best in­ter­ests.

For in­stance, many Baby Boomers haven’t saved enough for re­tire­ment. And Amer­i­cans kept buy­ing homes in the mid-2000s, cre­at­ing a bub­ble that burst and trig­gered the Great Re­ces­sion.

The 72-year-old econ­o­mist joked af­ter win­ning the prize that he in­tends to spend the money “as ir­ra­tionally as pos­si­ble.”

Thaler’s re­search earned him a cameo in the 2015 Os­car-nom­i­nated movie “The Big Short” about the global fi­nan­cial cri­sis. He’s also an­a­lyzed flawed strate­gies in the game show “Deal or No Deal,” and how school cafe­te­rias should dis­play their food for op­ti­mal health.

Josh Funk; J. Paschke • AP

Source: https://www.no­bel­prize.org/no­bel_prizes/eco­nomic-sci­ences/lau­re­ates

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