The Nobel Prize in Economics has been awarded to American economist and one of the pioneers of behavioral economics (and finance), Richard H. Thaler. Thaler is a professor of economics and behavioral sciences at the Booth School of Business at the University of Chicago. The 72-year-old Thaler has been lauded for his studies into human behavior that goes into the making of economic and financial decisions.

Thaler's triumph

Thaler, who is the co-author of the famous book 'Nudge', has been engaged in studies related to the psychology and behavior of participants in a market or economy, that eventually go on to have profound effects.

For instance, his theories on how an absence of rationality in economic decision-making processes among people can have long-term effects on an economy are quite famous.

In a statement released today, the Royal Swedish Academy of Sciences said, that his studies into behaviors of individuals as well as institutions have proven how both financial markets and economies can be affected by irrational economic decisions. Thaler's influence as a behavioral economist had also seen him appear as an expert in the Oscar-winning film 'The Big Short' in which he explained how certain types of synthetic CDOs (collateralized debt obligation) work and lead to massive losses.

Noted theories

Throughout his career as an economist, Thaler has propounded theories that have been found to be extremely important for real-world situations as regards to both individuals and institutions. For instance, his theory of mental accounting about people's tendency to make financial decisions by compartmentalizing the accounts in their minds is a particularly famous one. On the other hand, he also conducted how businesses refuse to raise prices even when a product might show a lot of demand among consumers.

It came to be known as the 'fairness' theory and is rooted in the fact that businesses fear an adverse reaction from consumers.

He has also researched the effect of certain temptations that leave people with not enough money during their old age. Thaler's contributions towards behavioral economics have been immense.

After coming to know of the announcement, Richard Thaler did not lose any of his charm and sense of humor. He stated that he was going to spend the substantial prize money 'as irrationally as possible', which was without a doubt a nod to his selected branch of economics studies.

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