Richard Thaler
Encyclopedia
Richard H. Thaler 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.
, 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 recurrent theme 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"
Most recently Thaler is coauthor, with Cass R. 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 blunder
s 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
.
from 1987 to 1990 titled Anomalies, in which he documented individual instances of economic behavior that seemed to violate traditional microeconomic
theory.
In one of his most recent papers, 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.
es such as the endowment effect
, loss aversion
and status quo bias
.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
and the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
Booth School of Business
Booth School of Business
The University of Chicago Booth School of Business is a graduate business school located in Chicago, Illinois, at the University of Chicago. Formerly known as the University of Chicago Graduate School of Business, Chicago Booth is the second oldest business school in the U.S., the first such school...
. He is perhaps best known as a theorist in behavioral finance
Behavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
, and for his collaboration with Daniel Kahneman
Daniel Kahneman
Daniel Kahneman is an Israeli-American psychologist and Nobel laureate. He is notable for his work on the psychology of judgment and decision-making, behavioral economics and hedonic psychology....
and others in further defining that field.
Books
Thaler has written a number of books intended for a lay reader on the subject of behavioral financeBehavioral finance
Behavioral economics and its related area of study, behavioral finance, use social, cognitive and emotional factors in understanding the economic decisions of individuals and institutions performing economic functions, including consumers, borrowers and investors, and their effects on market...
, 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 recurrent theme 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"
Most recently Thaler is coauthor, with Cass R. Sunstein, of Nudge: Improving Decisions About Health, Wealth, and Happiness
Nudge (book)
Nudge: Improving Decisions about Health, Wealth, and Happiness is a book written by Richard Thaler and Cass Sunstein. The book draws on research in psychology and behavioral economics to defend libertarian paternalism and active engineering of choice architecture.The book received mixed reviews...
(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 blunder
Blunder
A blunder is a particularly bad mistake. Specific instances include:* Blunder , a very poor move in chess* Hopetoun Blunder, an event in Australian history.* Brand blunder, in marketing.* Draft blunder, in American sports....
s 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
Choice architecture
Choice architecture describes the way in which decisions are influenced by how the choices are presented , and is a term used by Cass Sunstein and economist Richard Thaler in the 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness...
.
Other writing
Thaler gained some attention in the field of economics for publishing a regular column in the Journal of Economic PerspectivesJournal of Economic Perspectives
The Journal of Economic Perspectives is an economic journal published by the American Economic Association. The journal is very broad in its scope...
from 1987 to 1990 titled Anomalies, in which he documented individual instances of economic behavior that seemed to violate traditional microeconomic
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
theory.
In one of his most recent papers, Thaler and colleagues analyzed the choices of contestants appearing in the popular TV game show Deal or No Deal
Deal or No Deal
Deal or No Deal is the name of several closely related television game shows, the first of which was the Dutch Miljoenenjacht produced by Dutch producer Endemol. It is played with up to 26 cases with certain sums of money...
and found support for behavioralists' claims of path-dependent risk attitudes. He has also studied cooperation in the UK game show Golden Balls
Golden Balls
Golden Balls was a British daytime game show on the ITV network, presented by Jasper Carrott. It was filmed at the BBC Television Centre. From 25 February 2008 to 13 February 2009, the show was sponsored by ITV Bingo ; and from 2 November to 18 December 2009, the show was sponsored by Carpet Right...
.
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
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
(FCC) and making television broadcast frequency available for improving wireless technology, reducing costs, and generating revenue for the US government.
Other work
Thaler also is the founder of an asset management firm, Fuller & Thaler Asset Management, that enables a select group of investors to capitalize on cognitive biasCognitive bias
A cognitive bias is a pattern of deviation in judgment that occurs in particular situations. Implicit in the concept of a "pattern of deviation" is a standard of comparison; this may be the judgment of people outside those particular situations, or may be a set of independently verifiable...
es such as the endowment effect
Endowment effect
In behavioral economics, the endowment effect is a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not...
, loss aversion
Loss aversion
In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains....
and status quo bias
Status quo bias
The status quo bias is a cognitive bias for the status quo; in other words, people tend not to change an established behavior unless the incentive to change is compelling...
.
Books
- Thaler, Richard H. 1964. The Winner's Curse: Paradoxes and Anomalies of Economic Life. Princeton: Princeton University Press. ISBN 0691019347.
- Thaler, Richard H. 1993. Advances in Behavioral Finance. New York: Russell Sage Foundation. ISBN 0871548445.
- Thaler, Richard H. 1994. Quasi Rational Economics. New York: Russell Sage Foundation. ISBN 087154847X.
- Thaler, Richard H. 2005. Advances in Behavioral Finance, Volume II (Roundtable Series in Behavioral Economics). Princeton: Princeton University Press. ISBN 0691121753.
- Thaler, Richard H., and Cass R. Sunstein. 2009 (updated edition). Nudge: Improving Decisions About Health, Wealth, and Happiness. New York: Penguin. ISBN 014311526X.
External links
- Curriculum Vitae
- Faculty home page at U of Chicago
- Article: Deal or No Deal
- Podcast featuring Thaler Thaler discusses libertarian paternalism on EconTalkEconTalkEconTalk is a weekly podcast hosted by professor Russell Roberts at George Mason University. Roberts interviews guests—often professional economists—on topics in economics....
. - Nudge web page
- Nudge blog