Richard Thaler Wins Nobel Prize in Economics
This year’s Nobel Prize in Economics is very Billfold-relevant; the committee elected to award Richard Thaler, a University of Chicago professor who helped establish the field of behavioral economics.
You might remember Richard Thaler from his cameo in The Big Short, in which he and Selena Gomez explain synthetic CDOs, or his 2008 book Nudge: Improving Decisions About Health, Wealth, and Happiness.
Nudge explains that many people don’t know how to make the best decisions for both themselves and for the larger society, either because they don’t have enough information or because they prefer short-term rewards to long-term benefits. However, tiny “nudges,” such as presenting items in a specific order or making a program opt-out instead of opt-in, can help people make better decisions:
By properly deploying both incentives and nudges, we can improve our ability to improve people’s lives, and help solve many of society’s major problems. And we can do so while still insisting on everybody’s freedom to choose.
I read Nudge when it was originally published, and because I preferred short-term rewards to long-term benefits, I did my reading from a Borders armchair. Nearly ten years later, Borders is dead and the publication industry is consolidating, and you can trace it back to people like me making those types of decisions. (Yes, Borders arguably nudged me to sit in those armchairs—and yes, I don’t see armchairs quite so often in bookstores these days.)
So if any Billfolders would be interested in revisiting Nudge and learning more about behavioral economics and how we can make better financial decisions, I would be more than happy to set up a discussion. This time, I’ll actually buy the book.