How Modi put Nobel Prize victor Richard Thaler's 'nudge theory' to use

Oct 11, 2017, 00:22
How Modi put Nobel Prize victor Richard Thaler's 'nudge theory' to use

United States academic Richard Thaler, who helped popularise the idea of "nudging" people towards doing what was best for them, won the 2017 Nobel Economics Prize on Monday for his work on how human nature affects supposedly rational markets.

Once considered an outlier, behavioral economics today has become part of generally accepted economic thinking, in large part thanks to Thaler's ideas.

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Thaler, a professor at the University of Chicago, won the $1.1m prize on Monday for his "understanding [of] the psychology of economics" and "profound impact on many areas of economic research and policy", the Nobel committee said. Thaler is one of the founding fathers of behavioural economics, a field that shows that people often make irrational decisions, that don't serve their best interests.

In 2001, Thaler along with Shlomo Benartzi of the UCLA Anderson School of Management, addressed the issue of using behavioral economics to increase employee saving.

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The academy also cited Thaler's work with Cass Sunstein and their 2008 book, Nudge: Improving Decisions about Health, Wealth, and Happiness, which the idea of "libertarian paternalism" where beneficial changes in behavior can be achieved by "minimally invasive policies" that nudge people to make the right decisions for themselves.

While she says it's hard to overcome some of these tendencies outlined in Thaler's research, Madrian says "the key is to recognize your shortcomings and then try to set yourself up to limit their effects when you're not in a vulnerable situation".

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Thaler was born 1945 in East Orange, New Jersey and received his Ph.D.in 1974 from the University of Rochester, New York. Indeed only one women - Elinor Ostrom in 2009 - has won the economics prize to date, and not a single individual women won any Nobel award in 2017.

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