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Thaler in 2015
September 12, 1945 |
East Orange, New Jersey, United States
|Education||Case Western Reserve University (BA)
University of Rochester (MA, PhD)
|Awards||Nobel Memorial Prize in Economic Sciences (2017)|
|Institutions||Graduate School of Management at the University of Rochester (1974–1978)
Johnson School of Management at Cornell University (1978–1995)
Booth School of Business at the University of Chicago (1995–present)
|Thesis||The Value of Saving a Life: A Market Estimate (1974)|
|Doctoral advisor||Sherwin Rosen|
Herbert A. Simon
Richard H. Thaler (//; born September 12, 1945) is an American economist and the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business.
He is perhaps best known as a theorist in behavioral finance, and for his collaboration with Daniel Kahneman and others in further defining that field. In 2017, he was awarded the Nobel Memorial Prize in Economic Sciences for his contributions to behavioral economics. When discussing its selection of Thaler to receive the Nobel Prize, the Royal Swedish Academy of Sciences reasoned that his "contributions have built a bridge between the economic and psychological analyses of individual decision-making. His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioral economics."
Thaler was born in East Orange, New Jersey. His mother, Roslyn (Melnikoff), was a teacher, and his father, Alan M. Thaler, was an actuary at the Prudential Financial in Newark, New Jersey, and was born in Toronto. His family is Jewish, and he grew up with two younger brothers. He is married to France Leclerc, a former marketing professor. He has three children from his first marriage.
He graduated from Newark Academy, before going on to the receive his Bachelor of Arts in 1967 from Case Western Reserve University, and his master's in 1970 and doctorate in 1974 from the University of Rochester, writing his thesis on "The Value of Saving A Life: A Market Estimate" under the supervision of Sherwin Rosen.
After completing his studies, he began his career as a professor at the University of Rochester. From 1978 to 1995, he was a faculty member at the SC Johnson College of Business at Cornell University and then at the University of Chicago's Booth School of Business in 1995. Since 1999, he has been the Principal of the Fuller & Thaler Asset Management, which he co-founded in 1993. He has also been the co-director of the National Bureau of Economic Research Behavioral Economics Project since 1991.
Thaler has written a number of books intended for a lay reader on the subject of behavioral finance, including Quasi-rational Economics and The Winner's Curse, the latter of which contains many of his Anomalies columns revised and adapted for a popular audience. His leitmotif is that market-based approaches are incomplete: he is quoted as saying, "conventional economics assumes that people are highly-rational—super-rational—and unemotional. They can calculate like a computer and have no self-control problems."
Thaler is coauthor, with Cass Sunstein, of Nudge: Improving Decisions About Health, Wealth, and Happiness (Yale University Press, 2008). Nudge discusses how public and private organizations can help people make better choices in their daily lives. "People often make poor choices—and look back at them with bafflement!" Thaler and Sunstein write. "We do this because as human beings, we all are susceptible to a wide array of routine biases that can lead to an equally wide array of embarrassing blunders in education, personal finance, health care, mortgages and credit cards, happiness, and even the planet itself." Thaler and his co-author coined the term choice architect.
In 2015 Thaler wrote Misbehaving: The Making of Behavioral Economics, a history of the development of behavioral economics, "part memoir, part attack on a breed of economist who dominated the academy—particularly, the Chicago School that dominated economic theory at the University of Chicago—for the much of the latter part of the 20th century."
Thaler gained some attention in the field of economics for publishing a regular column in the Journal of Economic Perspectives from 1987 to 1990 titled Anomalies, in which he documented individual instances of economic behavior that seemed to violate traditional microeconomic theory.
In a 2008 paper, Thaler and colleagues analyzed the choices of contestants appearing in the popular TV game show Deal or No Deal and found support for behavioralists' claims of path-dependent risk attitudes. He has also studied cooperation in the UK game show Golden Balls.
As a columnist for the New York Times News Service, Thaler has begun a series of economic solutions for some of America's financial woes, beginning with "Selling parts of the radio spectrum could help pare US deficit," with references to Thomas Hazlett's ideas for reform of the U.S. Federal Communications Commission (FCC) and making television broadcast frequency available for improving wireless technology, reducing costs, and generating revenue for the US government.
Thaler was the 2017 recipient of the Nobel Memorial Prize in Economics for "incorporat[ing] psychologically realistic assumptions into analyses of economic decision-making. By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes."
After learning that he had won the Nobel Prize, Thaler said that his most important contribution to economics "was the recognition that economic agents are human, and that economic models have to incorporate that." In a nod to the sometimes-unreasonable behavior he has studied so extensively, he also joked that he intended to spend the prize money "as irrationally as possible."
Paul Krugman, the 2008 winner of the Nobel Memorial Prize in Economics, tweeted "Yes! Behavorial econ is the best thing to happen to the field in generations, and Thaler showed the way." However, Thaler's selection did not meet with universal acclaim; Robert Shiller (one of the 2013 laureates) noted that some economists still view dubiously Thaler's incorporation of a psychological perspective within an economics framework.
Thaler also is the founder of an asset management firm, Fuller & Thaler Asset Management, that says a group of investors will capitalize on cognitive biases such as the endowment effect, loss aversion and status quo bias.
Thaler made a cameo appearance as himself in the 2015 movie The Big Short, which was about the credit and housing bubble collapse that led to the 2008 global financial crisis. During one of the film's expository scenes he helped pop star Selena Gomez explain the 'hot hand fallacy,' in which people think that whatever is happening now will continue to happen into the future.
Thaler was instrumental in the creation of the UK’s Behavioural Insights Team (BIT), originally a No 10 unit, back in 2010.