STOCKHOLM – An American economist has been awarded the 2017 Nobel Prize in Economic Sciences – the final award for this year – for his work in integrating economics and psychology.
Richard H. Thaler won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017 on Monday from the Royal Swedish Academy of Sciences.
“By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes,” the Nobel announcement said.
Thaler developed the theory of mental accounting, which helps to explain how people simplify financial decision-making by creating separate accounts in their minds, His discovery showed why people tend to value the same item more highly when they own it than when they don’t.
Thaler also did research on the concept of fairness by developing the dictator game with colleagues to study and measure the attitudes of fairness of different people around the world.
Thaler’s research into the concept of self-control utilizing the planner-doer model is credited with shedding light on the internal tension between long-term planning and short-term doing.
“Succumbing to short-term temptation is an important reason why our plans to save for old age, or make healthier lifestyle choices, often fail,” the Nobel announcement said.
“In his applied work, Thaler demonstrated how nudging – a term he coined – may help people exercise better self-control when saving for a pension, as well in other contexts.”
Thaler earned a doctoral degree in 1974 at the University of Rochester in New York and is currently a Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics and the University of Chicago Booth School of Business in Illinois.
He is the co-author (with Cass R. Sunstein) of the global best seller Nudge (2008) in which the concepts of behavioral economics are used to tackle many of society’s major problems.
Speaking to journalists over teleconference, Dr. Tahler said his works emphasise that economic agents are human and economic models have to incorporate that.
The Nobel Prize for Economics was the final award given out this year. The Peace Prize and others in physics, chemistry, literature and medicine were awarded last week.
The winner will walk away with 9-million-kronor ($1.1-million) prize.
Last year, Oliver Hart and Bengt Holmström shared the prize for their contributions to contract theory.