Richard Thaler
American economist and Nobel laureate in behavioral economics.
Richard H. Thaler (born September 12, 1945) is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. A theorist in behavioral economics, he was awarded the Nobel Memorial Prize in Economic Sciences in 2017 for his contributions that "have built a bridge between the economic and psychological analyses of individual decision-making." His empirical findings and theoretical insights were instrumental in creating the field of behavioral economics.
- born
- September 12, 1945
- field
- Behavioral economics
- nationality
- American
- known_for
- Endowment effect, mental accounting, myopic loss aversion, nudge theory, liberta
- awards
- Nobel Memorial Prize in Economic Sciences (2017)
Verified Timeline
Lore & Background
Thaler was born in East Orange, New Jersey, to a Jewish family. His mother, Roslyn, was a teacher and later a real estate agent; his father, Alan Maurice Thaler, was an actuary at Prudential Financial in Newark, New Jersey, and was born in Toronto. He graduated from Newark Academy, earned a B.A. in 1967 from Case Western Reserve University, and an M.A. in 1970 and Ph.D. in 1974 from the University of Rochester, writing his thesis on "The Value of Saving A Life: A Market Estimate" under Sherwin Rosen. He also studied under Richard Rosett, whose wine-buying habits featured in Thaler's research. After starting his career at the University of Rochester, he spent 1977–1978 at Stanford University collaborating with Daniel Kahneman and Amos Tversky, who provided the theoretical framework for economic anomalies like the endowment effect. From 1978 to 1995 he was a faculty member at Cornell University, where in 1989 he became founding director of the Center for Behavioral Economics and Decision Research. In 1995 he joined the University of Chicago Booth School of Business, where he has taught ever since. He was president of the American Economic Association in 2015 and elected to the National Academy of Sciences in 2018.
Reader's Guide
Thaler's significance comes from his foundational contributions to behavioral economics. His endowment effect studies showed people value possessions they own more than identical ones they don't, contradicting traditional market-value logic. Mental accounting, a concept he introduced, illustrates how people categorize money by source—salaries, savings, tax refunds—leading to puzzling financial decisions like splurging a refund but hesitating to spend the same amount from a paycheck. With Benartzi, he demonstrated myopic loss aversion, where investors underinvest in equities due to short-term loss aversion, contributing to the equity premium puzzle. His work on choice architecture and libertarian paternalism, developed with Cass Sunstein in the book 'Nudge', shows how presenting options in specific ways—like making retirement plan enrollment the default—can guide better decisions without restricting freedom. He also coined the term "sludge" for friction that makes it harder for people to get better outcomes. The Royal Swedish Academy of Sciences stated his contributions "have been instrumental in creating the new and rapidly expanding field of behavioral economics."
Did You Know?
- Thaler's Ph.D. thesis was titled 'The Value of Saving A Life: A Market Estimate' and was supervised by Sherwin Rosen.
- He studied under Richard Rosett, whose wine-buying habits were featured in Thaler's behavioral economics research.
- Thaler was president of the American Economic Association in 2015.
- He was elected a member of the National Academy of Sciences in 2018.
- Thaler is married to France Leclerc, a former marketing professor at the University of Chicago and avid photographer.
Frequently Asked Questions
Who is Richard Thaler?
Richard Thaler is an American economist born in 1945 who holds a distinguished professorship at the University of Chicago's Booth School of Business. He is best recognized as a leading figure in behavioral economics, a field that blends psychological insight with traditional economic theory.
What is Richard Thaler most famous for?
Thaler is widely credited with developing concepts like the endowment effect, mental accounting, and myopic loss aversion, all of which describe how people make financial decisions in ways that deviate from rational models. He also co-authored the influential nudge framework, which proposes that small changes in how choices are presented can steer people toward better outcomes without removing their freedom of choice.
When and why did Richard Thaler receive the Nobel Prize?
In 2017, Thaler was awarded the Nobel Memorial Prize in Economic Sciences for pioneering behavioral economics. The committee recognized his work for connecting psychological research on decision-making with the analytical tools of traditional economics.
What is the endowment effect in Thaler's work?
The endowment effect describes the tendency for people to value an object more highly simply because they own it, compared to its value to someone who does not possess it. Thaler used this observation to challenge the assumption that buyers and sellers evaluate goods identically.
What role does libertarian paternalism play in Thaler's research?
Libertarian paternalism is the idea that policymakers can structure the environment in which people make decisions—so-called nudges—to encourage healthier or wealthier choices while still leaving all options available. Thaler helped popularize this approach as a practical way to apply behavioral insights in public policy.
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