Over the years, Richard H. Thaler—announced as the winner of the 2017 Nobel Prize in economics on Monday—has provided a necessary corrective to traditional economic theory.
On the face of it, the American economist’s primary contribution is commonsensical. He has played up the notion of human individuality in economic activity.
This is obvious, surely. But neoclassical models had elevated the inherently rational, self-interested nature of the market in a manner that overlooked the fact that not all people are perfectly rational in their economic activity. Social and cultural preferences, a lack of self-control or simple altruism can make them spokes in the wheels of neoclassical economics.
As one of the founders of behavioural economics, Thaler showed the relevance of other social sciences in economic analysis. And the potential of his “nudge” theory to shape public decision-making has been seen in countries like the US and UK. In a post-financial crisis world where economists are often derided for ivory tower theorizing, he is a grounded—and apt—choice.