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LONDON – Economist Richard Thaler has been awarded the 2017 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, often considered to be the most prestigious prize in the field of economics.
Thaler was awarded the prize “for his contributions to behavioural economics.”
According to the Nobel committee, Thaler has “incorporated psychologically realistic assumptions into analyses of economic decision-making.”
“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.”
Thaler’s work examines how human psychology impacts economic and financial decision making, as well as trying to make economists realise that “economic agents are human” and cannot always be treated as rational actors.
While the prize has been awarded to lesser known economists several times in recent years, Thaler is one of the world’s best known economists and his book “Nudge: Improving Decisions about Health, Wealth, and Happiness” – which he co-authored with Harvard professor Cass R. Sunstein, is one of the most widely read economics books of recent years.
He also appeared in the film “The Big Short” alongside popstar Selena Gomez explaining the concept of the “hot hand fallacy” a key behavioural feature that drove the rise of synthetic collateralised debt obligations – one of the key drivers of the US subprime mortgage crisis in 2007 – as the video below shows:
Thaler is currently the Charles R. Walgreen Distinguished Service Professor of Behavioural Science and Economics. His interests outside of economics include golf and fine wine.
Although the prize cannot technically be considered a Nobel Prize as it was not established in the will of Alfred Nobel, it is regarded to be equivalent to those prizes (Chemistry, Literature, Peace, Physics and Medicine), and is effectively a Nobel Prize for Economics.
The prize is given to an economist who has made a substantial contribution toward the subject, with an award of 9 million Swedish krona ($1.1 million, £844,000).
The prize has previously gone to such major names as Milton Friedman, Paul Krugman, and Friedrich von Hayek. Political scientists whose work has influenced economics as a discipline have also been honoured in the past.
Last year’s prize was awarded to economists Oliver Hart and Bengt Holmström for work on contract theory, the study of how contracts and incentives influence decision-making and business relationships.