RICHARD THALER

   

Richard thaler

                                            -AACHAL BURANDE

Richard Thaler, (born September 12, 1945, East Orange, New Jersey, U.S.), American economist who was awarded the 2017 Nobel Prize for Economics for his contributions to behavioral economics, a field of microeconomics that applies the findings of psychology and other social sciences to the study of economic behaviour. In published work spanning more than four decades, Thaler explored how economic decision making by both individuals and institutions is systematically and significantly influenced by natural human cognitive limitations and biases, among other psychological factors.

               His findings consistently refuted the common assumption within economic theory that individuals always act rationally and selfishly, an idealization that most economists had nevertheless accepted as valid for predictive purposes. Thaler’s identification of specific ways in which people’s real economic behaviour deviates from rational norms had important practical implications, suggesting that many public and private social policies could be made more effective by incorporating subtle inducements, or “nudges,” designed to steer people toward good decision making without ultimately depriving them of their freedom to choose, an approach that Thaler and others called libertarian paternalism.

   The goal of intelligent social policy ought to be to assist the planning self without unduly frustrating the doing self, in light of what is known about nonrational influences on the doing self’s behaviour. The planner-doer approach has found practical application in the design of a retirement savings program, called Save More Tomorrow (SMarT), that allows individuals to commit themselves to save (through payroll deductions) a certain percentage of their future pay increases, thus increasing their overall savings contributions. Given people’s general bias toward the present, it is easier for them to accept reductions in disposable income that will occur in the future than those that would occur now.