Richard Thaler has won the Nobel economics prize for his contributions to behavioural economics.
He championed the concept of “nudging” people, through subtle changes in government policy, to do things that are in their long-term self-interest, such as saving for a pension.
The UK government’s 2012 policy of auto-enrolment for private pensions, where people have to opt out rather than opt in, and which has led to considerably higher private-sector, pension-saving participation, is considered an example of a highly successful nudge policy.
One of Mr Thaler’s other major contributions has been the exploration and demonstration of the concept of “mental accounting”, the observed habit of people to mentally set aside separate pots of money for different purposes, even when this may not be the most financially efficient use of their funds.
Last year, he also suggested that Brexit was an example of large numbers of people making a decision not based on economic self-interest.
“Most voters aren’t really thinking about it in a very analytical way… the people behind the leave campaign are voting with their guts. There’s no spreadsheet. This is much like a divorce without a pre-nup. You’re voting to leave, and we’ll take care of all the financial details later,” he said in an interview with MarketWatch.com.
The last time the economics Nobel - officially known was the Sveriges Riksbank Prize in memory of Alfred Nobel – was award for pioneers in behavioural economics was in 2002, when it was won by Daniel Kahneman, who has worked closely with Mr Thaler over the years.
“Richard Thaler’s contributions have built a bridge between the economic and psychological analyses of individual decision-making, said the Nobel committee.
“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many areas of economic research and policy.”
Mr Thaler, aged 72, is a professor of behavioural science and economics at the University of Chicago,
On his university home page Mr Thaler lists his interests as “golf and fine wine”.
He will receive a prize of 9 million Swedish krona, worth around £840,000.
“I will try to spend it as irrationally as possible!” Mr Thaler joked.
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