Economist Richard Thaler wins Nobel for work on psychology
US Economist Richard Thaler won the Nobel Prize for economics for his work showing that people sometimes behaved irrationally, taking economics into the realms of psychology and providing grounds for states to intervene in people’s lives.
"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," the jury’s statement said.
"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."
Quantifying or modelling people’s behaviour can be useful for producers and sellers of goods and services.
But, critics say his work, along with that of Cass Sunstein, helps foster a completely false idea that governments, which spend other people’s money, know better than people who earn the money, how it should be spent, creating space for ‘nudge’ or soft-interventionism.
Called ‘Libertarian Paternalism’, which critics say is an oxymoron, Thaler and his followers advocated that governments should ‘nudge’ people towards ‘better’ behaviour without outright banning their freedom to take a couse of action, such as by making a default option that a person could always opt out.
This could be applied to pensions or other savings, for instance, which is said to be low in countries like the US.
"In his applied work, Thaler demonstrated how nudging – a term he coined – may help people exercise better self-control when saving for a pension, as well in other contexts," the Nobel jury said.
The assertion supposes that the state or bureaucrats, as well as neo-classical economists and interventionists who want to control other people’s behaviour, always know what is best.
Critics have also pointed out that bad decisions people make, such as not saving for the future, is also due to wrong incentives from the government such as taxation of savings in general, wealth tax and ultimately retirement savings themselves, with people who actually save enough for their future being taxed at higher rates.