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University of Chicago Thaler Awarded Economics Nobel Prize
USAgNet - 10/12/2017

University of Chicago Prof. Richard H. Thaler has been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017.

The Royal Swedish Academy of Sciences honored Thaler, the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business, "for his contributions to behavioural economics," a relatively new field that bridges the gap between economics and psychology. Thaler's research investigates the implications of relaxing the standard economic assumption that everyone in the economy is rational and selfish, instead entertaining the possibility that some of the agents in the economy are sometimes human.

"Richard's original, broadly influential and paradigm-defining work has richly earned this recognition," President Robert J. Zimmer wrote in a message to the UChicago community. "We look forward to celebrating Richard's work and his place in the distinguished legacy of eminent economics research at the University of Chicago."

He is among the 90 scholars associated with the University to receive Nobel Prizes, and among the 29 who have received the Nobel Memorial Prize in Economics. In addition to Thaler, five current UChicago faculty members are Nobel laureates in economics: Profs. Eugene Fama and Lars Hansen (who won in 2013), Roger Myerson (2007), James Heckman (2000) and Robert E. Lucas Jr. (1995).

Thaler learned of the award after his cell phone rang at 4 a.m. The phone number was from Sweden, so "I had a pretty good idea what that might be," he said Monday. The award was particularly meaningful because behavioral economics was "really out in the wilderness 40 years ago," when Thaler began his research.

"It's been a long journey," he said, "so I'm happy about that."

At a news conference Monday morning in the Charles M. Harper Center, Chicago Booth Dean Madhav Rajan said Thaler "represents the quintessence of Chicago Booth's mission: to produce knowledge with enduring impact, and to influence and educate current and future leaders." Rajan also credited Thaler with helping to build Chicago Booth's faculty in behavioral science, "vastly expanding the school's footprint and stature in this field."

Thaler, who took the stage to cheering from the excited students and faculty who had lined the staircases of the Winter Garden, described the experience of being a Booth faculty member as one of "tough love. The behavioral science group, it's a little less tough, but only a little."

He admitted he hadn't persuaded all of his colleagues and fellow economists of the importance of behavioral economics, so instead, "I've used the strategy of corrupting the youth, whose minds aren't already made up," he said. "Many great, young economists have embraced behavioral economics...The growth of the field is really due to the work of the people that followed me."

Spotting fellow Nobel laureate Eugene Fama, the Robert R. McCormick Distinguished Service Professor of Finance, in the front row, Thaler added, "It's been good to be here all these 20 years, arguing with guys like Fama. It's good for me." These days, however, "[we] try to keep our arguments to the golf course."

Thaler, who has been dubbed the "father of behavioral economics," wrote the bestselling books Misbehaving: The Making of Behavioral Economics (2015) and Nudge: Improving Decisions About Health, Wealth and Happiness (2008). He is renowned for creating easy-to-understand scenarios that show how human behavior often contradicts traditional economic logic.

Many economic models, Thaler told National Public Radio last year, assume people are rational, unemotional, and self-controlled. "I believe that for the last 50 or 60 years, economists have devoted themselves to studying fictional creatures," he said. "They might as well be studying unicorns." Every day, his research reveals, we behave in ways that violate economic principles.

In keeping with his research into these human idiosyncrasies, Thaler joked in a Nobel news conference Monday morning that he planned to spend the 9 million Swedish krona (about $1.1 million USD) he will receive with the prize "as irrationally as possible."

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