His work highlighted the importance of human psychology in financial decisions
The Royal Swedish Academy of Sciences has awarded the 2017 Nobel Economics Prize to Richard Thaler for helping popularize the use of psychological principles to encourage good long-term decision-making.
Thaler’s research, for which he was given the US$1.1-million prize, illustrated how characteristics such as lack of self-control and fear of loss can blind people to the long-term consequences of their decisions, reported Reuters. The principles he laid out have had repercussions in many fields, including public policy and finance.
“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many areas of economic research and policy,” the academy said.
A professor at the University of Chicago’s Booth School of Business, Thaler helped popularize the use of “nudge” economics, named after the seminal 2008 book he co-wrote with Professor Cass Sunstein. The concept involves the use of subtle incentives, rather than blunt mandates, to influence people’s decisions.
The idea has gained traction among policymakers who have long struggled to popularize saving, healthy living, and other practices that could greatly benefit the general public. Rather than imposing taxes or bans, authorities and institutions in the US, the UK, Australia, and Sweden have begun to use “nudges,” which incentivize individuals without taking away their freedom to choose.
Thaler’s work has also been crucial in the developing field of behavioural finance, an application of behavioural economics that focuses more narrowly on how human psychology can lead people to make poor financial decisions.
Earlier this year, the Ontario Securities Commission (OSC) released a report on the use of behavioural insights in financial policy-making and regulation. It said that it would look for potential policy and operational areas where such insights could encourage better outcomes for investors and market participants.
For more of Wealth Professional's latest industry news, click here.
Related stories:
What hinders Canadians from investing?
OSC releases behavioural insights report
Thaler’s research, for which he was given the US$1.1-million prize, illustrated how characteristics such as lack of self-control and fear of loss can blind people to the long-term consequences of their decisions, reported Reuters. The principles he laid out have had repercussions in many fields, including public policy and finance.
“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many areas of economic research and policy,” the academy said.
A professor at the University of Chicago’s Booth School of Business, Thaler helped popularize the use of “nudge” economics, named after the seminal 2008 book he co-wrote with Professor Cass Sunstein. The concept involves the use of subtle incentives, rather than blunt mandates, to influence people’s decisions.
The idea has gained traction among policymakers who have long struggled to popularize saving, healthy living, and other practices that could greatly benefit the general public. Rather than imposing taxes or bans, authorities and institutions in the US, the UK, Australia, and Sweden have begun to use “nudges,” which incentivize individuals without taking away their freedom to choose.
Thaler’s work has also been crucial in the developing field of behavioural finance, an application of behavioural economics that focuses more narrowly on how human psychology can lead people to make poor financial decisions.
Earlier this year, the Ontario Securities Commission (OSC) released a report on the use of behavioural insights in financial policy-making and regulation. It said that it would look for potential policy and operational areas where such insights could encourage better outcomes for investors and market participants.
For more of Wealth Professional's latest industry news, click here.
Related stories:
What hinders Canadians from investing?
OSC releases behavioural insights report
