|Education|| Case Western Reserve University (BA)|
University of Rochester (MA, PhD)
|Awards||Nobel Memorial Prize in Economic Sciences (2017)|
|Fields||Behavioral economics, Behavioral finance, Nudge theory|
|Institutions|| Graduate School of Management at the University of Rochester (1974–1978)|
Johnson School of Management at Cornell University (1978–1995)
Booth School of Business at the University of Chicago (1995–present)
|Thesis||The Value of Saving a Life: A Market Estimate (1974)|
|Doctoral advisor||Sherwin Rosen|
|Influences|| Daniel Kahneman |
Herbert A. Simon
Richard H. Thaler ( // ; born September 12, 1945) is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. In 2015, Thaler was president of the American Economic Association.
Thaler is a theorist in behavioral economics who has collaborated with Daniel Kahneman, Amos Tversky, and others in further defining that field. In 2018, he was elected a member in the National Academy of Sciences.
In 2017, he was awarded the Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics.In its Nobel prize announcement, the Royal Swedish Academy of Sciences stated that his "contributions have built a bridge between the economic and psychological analyses of individual decision-making. His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioral economics."
Thaler was born in East Orange, New Jersey to a Jewish family.His mother, Roslyn (Melnikoff, 1921–2008), was a teacher, and later a real estate agent while his father, Alan Maurice Thaler (1917–2004), was an actuary at the Prudential Financial in Newark, New Jersey, and was born in Toronto. He grew up with two younger brothers. His great-great grandfather, Selig Thaler (1831–1903) was from Berezhany, Ukraine. He has three children from his first marriage and is now married to France Leclerc, a former marketing professor at the University of Chicago and avid photographer.
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Thaler graduated from Newark Academy,before going on to receive his B.A. degree in 1967 from Case Western Reserve University, and his M.A. in 1970 and Ph.D. degree in 1974 from the University of Rochester, writing his thesis on "The Value of Saving A Life: A Market Estimate" under the supervision of Sherwin Rosen. He also studied under departmental chair and neoclassicist Richard Rosett, whose wine-buying habits were featured in his research on behavioral economics.
After completing his studies, Thaler began his career as a professor at the University of Rochester.
Between 1977 and 1978, Thaler spent a year at Stanford University collaborating and researching with Daniel Kahneman and Amos Tversky, who provided him with the theoretical framework to fit many of the economic anomalies that he had identified, such as the endowment effect.
From 1978 to 1995, he was a faculty member at the SC Johnson College of Business at Cornell University.
After gathering some attention with a regular column in the respected Journal of Economic Perspectives (which ran between 1987 and 1990) and the publication of these columns by Princeton University Press (in 1992), Thaler was offered a position at the University of Chicago's Booth School of Business in 1995, where he has taught ever since.
Thaler has written a number of books intended for a lay reader on the subject of behavioral economics, including Quasi-rational Economics and The Winner's Curse, the latter of which contains many of his Anomalies columns revised and adapted for a popular audience. One of his recurring themes is that market-based approaches are incomplete: he is quoted as saying, "conventional economics assumes that people are highly-rational—super-rational—and unemotional. They can calculate like a computer and have no self-control problems."
Thaler is coauthor, with Cass Sunstein, of Nudge: Improving Decisions About Health, Wealth, and Happiness (Yale University Press, 2008). Nudge discusses how public and private organizations can help people make better choices in their daily lives. "People often make poor choices—and look back at them with bafflement!" Thaler and Sunstein write. "We do this because, as human beings, we all are susceptible to a wide array of routine biases that can lead to an equally wide array of embarrassing blunders in education, personal finance, health care, mortgages and credit cards, happiness, and even the planet itself." Thaler and his co-author coined the term "choice architecture."
Thaler advocates for libertarian paternalism, which describes public and private social policies that lead people to make good and better decisions through "nudges" without depriving them of the freedom to choose or significantly changing their economic incentives.An example of this can be seen in Nudge through defaults in organ donation. In the United States, citizens must opt in to donate their organs, while in Australia, citizens must opt out if they do not wish to donate. Consequently, Australia has much higher rates of organ donation than does the United States.
In 2015 Thaler wrote Misbehaving: The Making of Behavioral Economics , a history of the development of behavioral economics, "part memoir, part attack on a breed of economist who dominated the academy—particularly, the Chicago School that dominated economic theory at the University of Chicago—for the much of the latter part of the 20th century."
Thaler gained some attention in the field of mainstream economics for publishing a regular column in the Journal of Economic Perspectives from 1987 to 1990 titled Anomalies,in which he documented individual instances of economic behavior that seemed to violate traditional microeconomic theory.
In a 2008 paper,Thaler and colleagues analyzed the choices of contestants appearing in the popular TV game show Deal or No Deal and found support for behavioralists' claims of path-dependent risk attitudes. He has also studied cooperation and bargaining in the UK game shows Golden Balls and Divided .
As a columnist for The New York Times News Service, Thaler has begun a series of economic solutions for some of America's financial woes, beginning with "Selling parts of the radio spectrum could help pare US deficit," with references to Thomas Hazlett's ideas for reform of the U.S. Federal Communications Commission (FCC) and making television broadcast frequency available for improving wireless technology, reducing costs, and generating revenue for the US government.
Thaler was the 2017 recipient of the Nobel Memorial Prize in Economics for "incorporat[ing] 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."
Immediately following the announcement of the 2017 prize, Professor Peter Gärdenfors, Member of the Economic Sciences Prize Committee, said in an interview that Thaler had "made economics more human".
After learning that he had won the Nobel Prize, Thaler said that his most important contribution to economics "was the recognition that economic agents are human, and that economic models have to incorporate that."In a nod to the sometimes-unreasonable behavior he has studied so extensively, he also joked that he intended to spend the prize money "as irrationally as possible."
Paul Krugman, the 2008 winner of the Nobel Memorial Prize in Economics, tweeted "Yes! Behavorial econ is the best thing to happen to the field in generations, and Thaler showed the way."However, Thaler's selection was not met with universal acclaim; Robert Shiller (one of the 2013 laureates and a fellow behavioral economist) noted that some economists still view Thaler's incorporation of a psychological perspective within an economics framework as a dubious proposition. In addition, an article in The Economist simultaneously praised Thaler and his fellow behavioral colleagues while bemoaning the practical difficulties that have resulted from causing "economists as a whole to back away a bit from grand theorising, and to focus more on empirical work and specific policy questions."
In chronicling Thaler's path to Nobel laureate, John Cassidy notes that although Thaler's "nudge" theory may not overcome every shortcoming of traditional economics, it has at least grappled with them "in ways that have yielded important insights in areas ranging from finance to international development".
In addition to earning the Nobel Memorial Prize in Economic Sciences, Thaler holds many other honors and awards. He is a member of the National Academy of Science, the American Academy of Arts and Sciences, a Fellow of the American Finance Association, and more.
Thaler also is the founder of an asset management firm, Fuller & Thaler Asset Management,which believes that investors will capitalize on cognitive biases such as the endowment effect, loss aversion and status quo bias. Since 1999, he has been the Principal of the firm, which he co-founded in 1993. Russell Fuller, in charge of the firm's daily operations, said Thaler has changed the economics profession in that "[h]e doesn't write papers that are full of math. He writes papers that are full of common sense."
Since 1991, Thaler has also served as the co-director of the National Bureau of Economic Research Behavioral Economics Project.
Thaler was also involved in the establishment of the Behavioural Insights Team, which was originally part of the British Government's Cabinet Office but is now a limited company.
Thaler made a cameo appearance as himself in the 2015 movie The Big Short , which was about the credit and housing bubble collapse that led to the 2008 global financial crisis.During one of the film's expository scenes, he helped pop star Selena Gomez explain the 'hot hand fallacy,' in which people believe that whatever is happening now will continue to happen in the future. As a consequence of his appearance in the film, Thaler has an Erdős–Bacon number of 5.
Thaler has published over 90 papers in various sources, namely finance, business, and economic journals. Some of his most cited and influential papers are listed below.
Bounded rationality is the idea that rationality is limited when individuals make decisions. In other words, humans' "preferences are determined by changes in outcomes relative to a certain reference level". Limitations include the difficulty of the problem requiring a decision, the cognitive capability of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisficers, seeking a satisfactory solution, rather than an optimal solution. Therefore, humans do not undertake a full cost-benefit analysis to determine the optimal decision, but rather, choose an option that fulfils their adequacy criteria.
Daniel Kahneman is an Israeli psychologist and economist notable for his work on the psychology of judgment and decision-making, as well as behavioral economics, for which he was awarded the 2002 Nobel Memorial Prize in Economic Sciences. His empirical findings challenge the assumption of human rationality prevailing in modern economic theory.
Amos Nathan Tversky was an Israeli cognitive and mathematical psychologist and a key figure in the discovery of systematic human cognitive bias and handling of risk.
Energy economics is a broad scientific subject area which includes topics related to supply and use of energy in societies. Considering the cost of energy services and associated value gives economic meaning to the efficiency at which energy can be produced. Energy services can be defined as functions that generate and provide energy to the “desired end services or states”. The efficiency of energy services is dependent on the engineered technology used to produce and supply energy. The goal is to minimise energy input required to produce the energy service, such as lighting (lumens), heating (temperature) and fuel. The main sectors considered in energy economics are transportation and building, although it is relevant to a broad scale of human activities, including households and businesses at a microeconomic level and resource management and environmental impacts at a macroeconomic level.
Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals and institutions and how those decisions vary from those implied by classical economic theory.
Eugene Francis "Gene" Fama is an American economist, best known for his empirical work on portfolio theory, asset pricing, and the efficient-market hypothesis.
Cass Robert Sunstein is an American legal scholar known for his studies of constitutional law, administrative law, environmental law, and law and behavioral economics. He is also The New York Times best-selling author of The World According to Star Wars (2016) and Nudge (2008). He was the Administrator of the White House Office of Information and Regulatory Affairs in the Obama administration from 2009 to 2012.
John August List is an American economist at the University of Chicago, where he serves as Kenneth C. Griffin Distinguished Service Professor; from 2012 until 2018, he served as Chairman of the Department of Economics. List is noted for his pioneering contributions to field experiments in economics, with Nobel prize winning economist George Akerlof and noted law professor Cass Sunstein scribing that "List has done more than anyone else to advance the methods and practice of field experiments." As detailed in his popular science book, The Why Axis, List uses field experiments to offer new insights in various areas of economics research, such as education, private provision of public goods, discrimination, social preferences, prospect theory, environmental economics, marketplace effects on corporate and government policy decisions, gender and inclusion, corporate social responsibility and auctions.
Libertarian paternalism is the idea that it is both possible and legitimate for private and public institutions to affect behavior while also respecting freedom of choice, as well as the implementation of that idea. The term was coined by behavioral economist Richard Thaler and legal scholar Cass Sunstein in a 2003 article in the American Economic Review. The authors further elaborated upon their ideas in a more in-depth article published in the University of Chicago Law Review that same year. They propose that libertarian paternalism is paternalism in the sense that "it tries to influence choices in a way that will make choosers better off, as judged by themselves" ; note and consider, the concept paternalism specifically requires a restriction of choice. It is libertarian in the sense that it aims to ensure that "people should be free to opt out of specified arrangements if they choose to do so". The possibility to opt out is said to "preserve freedom of choice". Thaler and Sunstein published Nudge, a book-length defense of this political doctrine, in 2008.
Hersh Shefrin is a Canadian economist best known for his pioneering work in behavioral finance.
Nudge: Improving Decisions about Health, Wealth, and Happiness is a book written by University of Chicago economist and Nobel Laureate Richard H. Thaler and Harvard Law School Professor Cass R. Sunstein, first published in 2008. In 2021, a revised edition was released, subtitled The Final Edition.
Nudge theory is a concept in behavioral economics, political theory, and behavioral sciences that proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision-making of groups or individuals. Nudging contrasts with other ways to achieve compliance, such as education, legislation or enforcement.
Shlomo Benartzi is an American behavioral economist, known for his research on retirement savings and the Save More Tomorrow nudge. Benartzi is currently a Professor Emeritus at the UCLA Anderson School of Management in Los Angeles, California.
Misbehaving: The Making of Behavioral Economics is a book by Richard Thaler, economist and professor at the University of Chicago's Booth School of Business. He won the Nobel Prize for Economics in 2017.
David Gal is Professor of Marketing at the University of Illinois at Chicago. He is best known for his critiques of behavioral economics, and in particular his critique of the behavioral economics concept of loss aversion. His forthcoming book is titled The Power of the Status Quo.
Botond Kőszegi is an economist and a professor at Central European University.
Katherine L. Milkman is an American economist who is the James G. Dinan Professor at The Wharton School of the University of Pennsylvania. She is the President of the Society for Judgment and Decision Making.
Richard Nathaniel Rosett was an American economist and university administrator who served as the dean of the University of Chicago Booth School of Business from 1974 to 1982, Arts and Sciences at Washington University in St. Louis from 1984 to 1987, as well as chairman of the National Bureau of Economic Research.
Humu is a software company that uses machine learning to send "nudges," small recommendations based in nudge theory, to employees at work.
Thaler was instrumental in the creation of the UK's Behavioural Insights Team (BIT), originally a No 10 unit, back in 2010.