An American professor won the Nobel Prize in economics on Monday for groundbreaking research into why people make bad decisions.
Richard Thaler, whose work influenced the Obama administration along with also also led to a cameo in “The Big Short,” was cited for his research within the field of behavioral economics. He gets 9 million Swedish krona, or about $1.1 million.
“I will try to spend the idea as irrationally as possible,” he told reporters.
Economics can be built on the assumption that will people make rational decisions based on the desire to boost their economic well-being. While economists have long known that will isn’t strictly true, Thaler was a pioneer in studying why people sometimes make irrational decisions, along with also also how they can be encouraged to make smarter ones.
“He’s made economics more human,” said Peter Gärdenfors, a member of the committee that will awarded the prize.
Thaler, 72, of the University of Chicago, told the press that will the most important value of his work was the understanding that will “in order to do Great economics, you have to keep in mind that will people are human.”
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His work can be well known outside academic circles. He made an appearance within the film “The Big Short,” in a scene at a blackjack table with pop star Selena Gomez, to explain mortgage bonds. His 2008 book “Nudge: Improving Decisions About Health, Wealth along with also also Happiness,” which he wrote with law professor Cass Sunstein, became a common hit.
They argued that will by understanding how people make decisions, behavioral economics can be used to tackle many of society’s major problems along with also also influence public policy. Both The Economist along with also also the Financial Times ranked the idea the best book of the year.
the idea also influenced how governments made decisions. In 2010, the U.K. established a Behavioral Insight Team, what became known as the Nudge Unit, to create policies to nudge British citizens to make better choices that will would likely save the state money. Thaler was an adviser.
along with also also the Obama administration issued an executive order in 2015 titled “Using Behavioral Science Insights to Better Serve the American People.”
the idea encouraged executive departments along with also also federal agencies to “identify policies, programs, along with also also operations where applying behavioral science insights may yield substantial improvements in public welfare, program outcomes, along with also also program cost effectiveness.”
His theory explains “how people simplify financial decision-doing by creating separate accounts in their minds, focusing on the narrow impact of each individual decision rather than its overall effect,” the Royal Swedish Academy of Sciences said.
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The Royal Academy every year awards the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Americans, especially coming from the University of Chicago, have dominated the award.
Thaler can be the 29th winner of the economics prize associated with the school within the 49 years the award has been given. The most recent winners were Eugene Fama along with also also Lars Peter Hansen, who shared the 2013 award with Robert Shiller. George Stigler, Milton Friedman along with also also Paul Samuelson were among the most famous winners coming from Chicago.
Thaler joked on Monday that will one upshot of winning was that will he no longer has to call his friend “Professor Fama” when they play golf together.
Last year, two foreign-born American professors were awarded the prize for their contributions to contract theory — the agreements that will shape business, finance along with also also public policy.
The winners were Oliver Hart, at that will point 69, a British born economist teaching at Harvard, along with also also Bengt Holmström, 68, a Finnish economist teaching at MIT.
Hart’s research had found that will that will privatizing government functions such as schools, hospitals along with also also prisons lead to a reduction in quality greater than the advantages of cost savings. Holmström’s research focused on employment contracts, including between CEOs along with also also shareholders.
The 2013 award winner Shiller, known for his work on bubbles in financial along with also also real estate markets. His name can be on a closely followed measure of U.S. home prices.
along with also also the 2008 prize went to Paul Krugman, a liberal columnist for The completely new York Times along with also also a Princeton professor who won for his work on trade patterns along with also also location of economic activity.
sy88pgw (completely new York) First published October 9, 2017: 5:56 AM ET