Nobel Prize in Economics 2017 - Richard H. Thaler
The American economist / professor Richard Thaler won the 2017 Nobel Price in economics. He was awarded the Nobel Memorial Prize in Economic Sciences for his research in the field of behavioural economics into why people make bad decisions.
Richard Thaler is a pioneer in behavioural economics, a research field in which insights from psychological research are applied to economic decision-making. A behavioural perspective incorporates more realistic analysis of how people think and behave when making economic decisions, providing new opportunities for designing measures and institutions that increase societal benefit.
From his bio:
Richard H. Thaler studies behavioral economics and finance as well as the psychology of decision-making which lies in the gap between economics and psychology. He investigates the implications of relaxing the standard economic assumption that everyone in the economy is rational and selfish, instead entertaining the possibility that some of the agents in the economy are sometimes human.
Thaler is popular for his 2008 best selling book Nudge which he co-authored with Cass R. Sunstein, in which the concepts of behavioral economics are used to tackle many of society’s major problems.
In 2008 Richard Thaler also wrote a paper "Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show", which examines the choices contestants face in TV game shows such as "Deal or No Deal". According to the paper, contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes.
Coming back to the Nobel Prize, the committee said that Thaler's research has contributed to economic analysis by considering three psychological traits that systematically influence economic decisions – limited rationality, perceptions about fairness, and lack of self-control.
Let's look at these three traits briefly:
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