Richard Thaler, the US economist and behavioural scientist who helped inspire the UK government to make use of behavioural finance in public policy, has been awarded the Nobel Prize for Economics.
Co-author of the best-selling title Nudge, Thaler was a key influence on former Conservative chancellor George Osborne’s policies. His ideas helped inspire the Treasury to introduce policies such as auto-enrolment and the winter fuel payment.
Thaler argued, for example, that earmarking money for certain uses when giving it to people, despite it being available to use for any purpose, was more likely to be spent for the suggested reason – the theory behind winter fuel payments for pensioners.
Since 1995, Thaler has been professor of behavioural economics at Chicago University, which said he studies “behavioral economics and finance as well as the psychology of decision-making which lies in the gap between economics and psychology.”
It added: “He 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.”
Thaler previously taught at the University of Rochester and Cornell, as well as completing visiting stints at MIT and Stanford. He also serves on the academic advisory board of Allianz Global Investors, according to his personal website.
Another UK policy idea to come from Thaler is the ‘Save More Tomorrow’ scheme, which he developed alongside Shlomo Benartzi in a paper published in 2004.
The scheme offers workers the opportunity to commit to pension contribution increases ahead of future pay rises – something ex-pensions minister and current Royal London director of policy Steve Webb has urged the government to consider implementing alongside auto-enrolment.
One of the more unusual entries in Thaler’s CV is a cameo appearance in the 2015 film The Big Short, where – alongside popstar and actress Selena Gomez – he explained how synthetic collateralised debt obligations became increasingly popular in the run-up to the financial crisis.