American economist Richard H. Thaler – who has recently been awarded the Nobel Prize for his work showing economic and financial decisions are not always rational, but mostly human or psychological – has said that he will spend the prize money of USD 1.1 million “as irrationally as possible”.
While awarding the prize on October 9, the Royal Swedish Academy of Sciences showered praises on Thaler for bringing behavioural economics into the mainstream, as he explored the impact of psychological and social factors on individual or group decisions in the economy and financial markets.
A pioneer in applying psychology to economic behaviour, Thaler did a cameo in the film ‘The Big Short’ in which he used behavioural economics to help explain the causes of the financial crisis.

Richard H. Thaler

It is quite natural for such an economist to spend the prize money “irrationally”. He has already surprised his friends and admirers by saying that he was “very much asleep” when he received the good news. Speaking at a press conference at the University of Chicago, Thaler said that he received a phone call at 4am and the caller informed him that he had won the Nobel Prize.
Meanwhile, the 72-year-old ‘Nudge’ economist confirmed that he would visit Stockholm to receive the prize. “I had a pretty good idea what that might be. Unlike Bob Dylan, I do plan to go to Stockholm,” he said jokingly. It is to be noted that Dylan maintained silence for weeks after winning the Nobel Prize for Literature in 2016. Later, the singer visited the Swedish capital to accept the prize.

Thaler, a professor at the University of Chicago’s Booth School of Business, co-founded the Nudge theory (with legal scholar Cass Sunstein) according to which ‘happiness’ always influences people’s economic decisions. In fact, the book on the theory, which he co-authored with Professor Sunstein, became a bestseller and influenced many governments and companies with its original solutions to savings, consumption and issues related to public health.
Thaler explained that his theory is based on the idea that people mainly consider short-term impacts while making financial decisions and also encourage others to do so. He coined the term ‘possession factor’ while explaining that people want to prioritise what they already have, no matter if its value deteriorates, before making decisions. According to Thaler, although our economic decisions are not always beneficial, but those make us happy.

Milton Friedman

Before Thaler, another behavioural economist Milton Friedman won the Nobel Prize in 1976 “for his achievements in the fields of consumption analysis, monetary history and theory, and for his demonstration of the complexity of stabilisation policy”. Friedman, too, upset the classical economic theories by arguing that individuals act only in their best interests. Thaler acknowledged his predecessor’s work, saying: “Economists don’t do a lot of embracing. I do not believe that he changed anybody’s mind in 40 years.”

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Published by Koushik Das

Koushik Das (born on May 16, 1976 in Kolkata) is a career journalist. Based in the Indian capital of New Delhi, Koushik writes mainly about foreign policies and current geopolitical issues, and rarely about other topics. His own political ideas are highly influenced by Antonio Gramsci, Louis Althusser, Michel Foucault, Michael Oakeshott and others. English philosopher and political theorist Oakeshott (Dec 11, 1901-Dec 19, 1990) says that “in political activity, men sail a boundless and bottomless sea. There is neither harbour for shelter nor floor for anchorage, neither starting-place, nor appointed destination. But we have to keep afloat”. (Rationalism in Politics, 1962) As a student of Political Science, Koushik loves to share his views on issues, which have great impacts on his thought process (and also on India, South Asia and of course on the global community), with his readers through his website – Boundless Ocean of Politics. By doing so, he tries to keep himself afloat. You will find some of his articles in https://inserbia.info/today/ (https://inserbia.info/today/author/kou_das13_i/), as he has been trying to assess the global geopolitics since 2003. You can also mail him at kousdas@gmail.com View all posts by Koushik Das