[00:00.00]American economist Richard Thaler has won the 2017 Nobel Prize for Economics.
[00:09.39]Thaler was recognized for his work as a behavioral economist.
[00:16.07]That means he studies the reasons behind the economic decisions people make.
[00:23.88]Thaler received the prize partly for his research into why people often make irrational financial decisions.
[00:35.43]The Royal Swedish Academy of Sciences announced the $1.1 million prize on Monday.
[00:45.24]Speaking of the prize money, Thaler told reporters in Chicago after the announcement, “I will spend it as irrationally as possible.”
[00:59.07]The award committee said Thaler explored “the consequences of limited rationality, social preferences, and lack of self-control.”
[01:13.69]It said the American economist’s work has shown how human qualities affect people’s individual decisions and the movements of financial markets.
[01:28.19]Thaler developed the theory of “mental accounting.”
[01:34.59]It describes how people create separate accounts in their minds to try to simplify financial decision-making.
[01:45.45]He described how this can lead to less rational financial decisions like saving for a vacation while paying high credit card interest.
[01:59.53]His research, Bloomberg noted, showed that people often choose short-term pleasures, “which is why many people fail to plan and save for old age.”
[02:14.91]The Reuters said Thaler’s research showed that such traits “as lack of self-control and fear of losing what you already have” can cause people to make bad short-term decisions.
[02:34.56]One of those, Thaler noted, was keeping stock shares that have lost value or selling them too soon when they have gained value.
[02:45.90]Thaler helped develop the “nudge” theory.
[02:50.29]It is the idea that small incentives can influence people to make good decisions.
[02:59.35]He said people should be permitted to make their own choices,
[03:05.41]but society “should actively try to guide individuals in the right direction.”
[03:12.88]Cass Sunstein and Thaler wrote about the idea in the 2008 book “Nudge.”
[03:22.98]The theory has been used by political candidates as they work to influence voters and government officials seeking to make changes in society.
[03:38.16]Other areas also interested Thaler.
[03:42.54]He studied fairness.
[03:45.61]He found that people can accept increasing prices if the costs of many things are going up.
[03:54.62]But he found that they strongly disapprove of companies that raise prices simply because of high demand for one product.
[04:06.36]Bloomberg called Thaler’s Nobel Prize “a reward for 40 years of work spent studying human bias and temptation.”
[04:20.42]Thaler is considered one of the first behavioral economists.
[04:27.03]His field, once criticized, has grown in popularity among economists over the last 10 years.
[04:35.88]The economist even briefly appeared in the 2010 movie, “The Big Short,” about the global financial crisis.
[04:47.16]Thaler is a professor of behavioral science and economics at the University of Chicago Booth School of Business.
[04:58.18]The economics prize was created in 1968 in memory of Alfred Nobel after his death.
[05:09.00]Since then, 79 individuals have received the prize.
[05:15.36]The first woman winner was Elinor Ostrom in 2009.
[05:22.19]American have received about half of the Nobel Prizes for economics.
[05:31.16]I’m Mario Ritter.