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Richard Thaler

Richard Thaler
Richard Thaler Chatham.jpg
Thaler in 2015
Born (1945-09-12) September 12, 1945 (age 72)
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)
Scientific career
Fields Behavioral finance
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
Influences Daniel Kahneman
Herbert A. Simon
Influenced George Loewenstein

Richard H. Thaler (/ˈθlər/; 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[1][2] for his contributions to behavioral economics.[3][4] 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."[5]

Personal life

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,[6] and was born in Toronto.[7][8][9] His family is Jewish,[10] and he grew up with two younger brothers.[6] He is married to France Leclerc, a former marketing professor. He has three children from his first marriage.[11]

He graduated from Newark Academy,[12] before going on to the receive his Bachelor of Arts in 1967 from Case Western Reserve University,[13] 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.[14]

After completing his studies, he began his career as a professor at the University of Rochester.[6] 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.[6] Since 1999, he has been the Principal of the Fuller & Thaler Asset Management, which he co-founded in 1993.[6] He has also been the co-director of the National Bureau of Economic Research Behavioral Economics Project since 1991.[6]

As writer

Books

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."[15]

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.[16]

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."[17]

Other writing

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,[18] in which he documented individual instances of economic behavior that seemed to violate traditional microeconomic theory.[19][20][21]

In a 2008 paper,[22] 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.[23]

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.[24]

Nobel Prize

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."[25]

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."[26] 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."[27]

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."[28] 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.[29]

Thaler is the ninth Nobel prize recipient to be affiliated with the University of Rochester.[30]

Other work

Thaler also is the founder of an asset management firm, Fuller & Thaler Asset Management,[31] that says a group of investors will capitalize on cognitive biases such as the endowment effect, loss aversion and status quo bias.[32]

Thaler was also involved in the establishment of the Behavioural Insights Team, originally part of the British Government's Cabinet Office but is now a limited company.[33]

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.[34] 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.[35]

Publications

Books

References

  1. ^ Appelbaum, Binyamin (October 9, 2017). "Nobel in Economics Is Awarded to Richard Thaler". The New York Times. Retrieved October 11, 2017. 
  2. ^ Gauthier-Villars, David (October 9, 2017). "Nobel Prize in Economics Awarded to American Richard Thaler". The Wall Street Journal. Retrieved October 11, 2017. 
  3. ^ Keyton, David; Heintz, Jim (October 9, 2017). "American Richard Thaler wins Nobel Prize in Economics". Associated Press via USA Today. Retrieved October 11, 2017. 
  4. ^ Tetlow, Gemma (October 9, 2017). "Richard Thaler awarded 2017 Nobel prize in economics". Financial Times. Retrieved October 11, 2017. 
  5. ^ Pollard, Niklas; Ringstrom, Anna (October 9, 2017). "We're all human: 'Nudge' theorist Thaler wins economics Nobel". Reuters. Retrieved October 11, 2017. 
  6. ^ a b c d e f "Richard Thaler". The Famous People. Retrieved 11 October 2017. 
  7. ^ "Masters Series Interview with Richard H. Thaler, PhD – IMCA – Commentaries – Advisor Perspectives". www.advisorperspectives.com. Retrieved October 11, 2017. 
  8. ^ "Alan M. Thaler's Obituary on The Arizona Republic". The Arizona Republic. Retrieved October 11, 2017. 
  9. ^ "Roslyn Melnikoff Thaler's Obituary on The Arizona Republic". The Arizona Republic. Retrieved October 11, 2017. 
  10. ^ JINFO. "Jewish Economists". www.jinfo.org. Retrieved October 11, 2017. 
  11. ^ Karp, Gregory (April 30, 2012). "Profile: Richard Thaler, University of Chicago Booth School of Business professor". Chicago Tribune. Retrieved October 11, 2017. 
  12. ^ "Lumen". No. Spring 2016. Newark Academy. June 2, 2016. pp. 48–49. Retrieved October 11, 2017. 
  13. ^ "Alumnus Richard H. Thaler earns Nobel Prize for work in behavioral economics". October 9, 2017. Retrieved October 11, 2017. 
  14. ^ "Richard H. Thaler" (PDF). Booth School of Business CV. Retrieved October 11, 2017. 
  15. ^ David Orrell's Economyths, p. 123
  16. ^ Thaler, Richard H.; Sunstein, Cass R. (April 2, 2008). "Designing better choices". Los Angeles Times. Retrieved October 11, 2017. 
  17. ^ Knee, Jonathon A. (May 5, 2015). "In "Misbehaving," an Economics Professor Isn’t Afraid to Attack His Own". The New York Times. Retrieved October 11, 2017. 
  18. ^ "Anomalies". Archived from the original on August 29, 2006. Retrieved April 26, 2008. 
  19. ^ Thaler, Richard (1988). "The Winners Curse". Journal of Economic Perspectives. 2 (1): 191–202. ISSN 0895-3309. 
  20. ^ Thaler, Richard (1988). "The Ultimatum Game". Journal of Economic Perspectives. 2 (4): 195–206. ISSN 0895-3309. 
  21. ^ Kahneman, Daniel; Knetsch, Jack; Thaler, Richard (1991). "The Endowment Effect, Loss Aversion, and Status Quo Bias". Journal of Economic Perspectives. 5 (1): 193–206. ISSN 0895-3309. 
  22. ^ Post, Thierry; van den Assem, Martijn J.; Baltussen, Guido; Thaler, Richard H. (March 2008). "Deal or No Deal? Decision Making under Risk in a Large-Payoff Game Show". American Economic Review. 98 (1): 38–71. ISSN 0002-8282. SSRN 636508Freely accessible. 
  23. ^ van den Assem, Martijn J.; van Dolder, Dennie; Thaler, Richard H. (January 2012). "Split or Steal? Cooperative Behavior When the Stakes Are Large". Management Science. 58 (1): 2–20. ISSN 0025-1909. SSRN 1592456Freely accessible. 
  24. ^ "Selling parts of the radio spectrum could help pare US deficit". Taipei Times. Retrieved October 11, 2017. 
  25. ^ "The Prize in Economic Sciences 2017" (Press release). Royal Swedish Academy of Sciences. October 9, 2017. 
  26. ^ Isaac, Anna (October 9, 2017). "'Nudge' guru Richard Thaler wins the Nobel prize for economics". The Daily Telegraph. Retrieved October 11, 2017. 
  27. ^ Partington, Richard (October 9, 2017). "Nobel prize in economics awarded to Richard Thaler: Pioneer of behavioural economics is best known for 'nudge' theory, which has influenced politicians and policymakers". The Guardian. London. 
  28. ^ Long, Heather (October 9, 2017). "American professor wins Nobel Prize in economics for trying to understand bad human behavior". The Washington Post. Retrieved October 12, 2017. 
  29. ^ Shiller, Robert (October 11, 2017). "Richard Thaler is a controversial Nobel prize winner – but a deserving one". The Guardian. London. 
  30. ^ Iglinski, Peter (October 9, 2017). "Rochester graduate Richard Thaler receives Nobel Prize". University of Rochester. Retrieved October 11, 2017. 
  31. ^ "Behavioral Investing". Fuller & Thaler Asset Management. Retrieved October 11, 2017. 
  32. ^ "About Us". Fuller & Thaler Asset Management. Retrieved October 11, 2017. 
  33. ^ Halpern, David (10 October 2017). "‘Behavioural economics’ may sound dry – but it can change your life". www.theguardian.com. Guardian News and Media Limited. Retrieved 11 October 2017. Thaler was instrumental in the creation of the UK’s Behavioural Insights Team (BIT), originally a No 10 unit, back in 2010. 
  34. ^ Watercutter, Angela (December 11, 2015). "The Big Short Somehow Makes Subprime Mortgages Entertaining". Wired.com. Retrieved October 10, 2017. 
  35. ^ Richard Thaler, Selena Gomez (2015). The Big Short movie - explanation of the "hot hand fallacy" (film scene via YouTube). Paramount Pictures, Plan B Entertainment. 

External links