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 on Monday 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 self-control and fear of losing what you already have prompt decisions that may not have the best outcome in the longer term.
Awarding the 9 million Swedish crown (844,529.18 pounds) prize, the Royal Swedish Academy of Sciences said: “Richard Thaler’s contributions have built a bridge between the economic and psychological analyses of individual decision-making.”
Thaler brought to prominence the idea of “nudge” economics, where individuals are subtly guided toward beneficial behaviours without heavy-handed compulsion, the theme of a 2008 book he co-wrote which caught the eye of policymakers around the world.
In researching how self-control – or the lack of it – Thaler touched on an age-old 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 temptations often negatively affects plans to, for instance, save for retirement.
Together with Professor Cass Sunstein, 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 Happiness’ 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.
Source: International News agencies