U. of C.’s Richard Thaler wins Nobel for work in behavioral economics
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Like an evangelical preacher grown weary of old, hardened hearts, the world’s newest Nobel laureate in economics says he doesn’t even try to convert most in his field to his way of thinking.
“So given that, I’ve used the strategy of corrupting the youth, whose minds are not already made up,” joked Richard Thaler, a University of Chicago professor, who on Monday became the sixth current member of the institution’s faculty to receive the Nobel Prize in economics.
Thaler received the $1.1 million prize for “understanding of the psychology of economics,” Swedish Academy of Sciences secretary Goran Hansson said.
Thaler is considered one of the founding fathers of behavioral economics, a field that shows that far from being rational decision-makers described in economic theory, people often make decisions that don’t serve their best interests.
Thaler, awakened at 4 a.m. with a call from Sweden, summed up his thoughts on Monday’s honor in an economical 2½ minutes.
“Today’s prize does compensate a bit for my disappointment at the Oscars two years ago,” he said, referring to his cameo role alongside Selena Gomez in the 2015 film “The Big Short” about the global financial crisis. “There’s no prize for best behavioral economist, which I think is unfair.”
Then, with self-deprecating wit, he took questions from the international media gathered inside the vast atrium of the Booth School of Business’ Charles M. Harper Center.
When he got the call at home about the prize, he said he was told to keep mum for at least an hour.
“Like there’s a lot of people awake waiting for your call,” Thaler said.
The joking continued: “Unlike Bob Dylan, I plan to go to Stockholm” to pick up the award. Dylan famously stayed away after winning the 2016 Nobel for literature, finally accepting it in April at a private ceremony in Stockholm.
In 2008, Thaler co-wrote a paper examining the choices contestants face in games such as the TV show “Deal or No Deal,” including about how early outcomes affect decisions later in the game. In the paper, Thaler and the authors say that contestants become bolder in their choices when their initial expectations of how much they would win are shattered, whether by big losses or big gains.
Speaking by phone to a news conference immediately after he was announced as the prize winner, Thaler said he would likely use the prize money in ways consistent with his research.
“I will say that I will try to spend it as irrationally as possible,” he said.
Maybe on some pricey Cubs’ playoff tickets? Thaler is apparently a fan.
“He has transformed economics in an important way and is extremely deserving — even of the notable solo prize,” said Emir Kamenica, a professor of economics at the U. of C.
For the last 11 years, Kamenica has taught behavioral economics with Thaler.
“He is an absolutely fantastic teacher. He is very fun and wise and engaging with students,” Kamenica said.
Beyond his academic life, Thaler is a lover of fine wine.
“He has a very nice wine cellar and he’s very generous with it,” Kamenica said. “He’s clearly extremely knowledgeable.”
Peter Gardenfors, a member of the prize committee, said that one of the practical applications of Thaler’s work was development of the “save more tomorrow” strategy for retirement-savings accounts. Under that model, many employees who resist immediately raising the portion of their salary put into retirement accounts will agree to raise their contributions in the following year and usually continue with the higher level.
“Richard Thaler has fundamentally altered our understanding of the world by demonstrating that people are much more than just robots following simple mathematical rules,” Michael Greenstone, another professor of economics at the University of Chicago, said in an email. “In addition, his research has had great influence as governments have sought to find policies that serve human beings as they really are, not as they might be.”
The economics prize is something of an outlier — Alfred Nobel’s will didn’t call for its establishment and it honors a science that many doubt is a science at all.
The Sveriges Riksbank (Swedish National Bank) Prize in Economic Sciences in Memory of Alfred Nobel was first awarded in 1969, nearly seven decades after the series of prestigious prizes that Nobel called for.
Despite its provenance and carefully laborious name, it is broadly considered an equal to the other Nobel and the winner attends the famed presentation banquet.
Contributing: Associated Press