Richard Thaler, a professor at the University of Chicago, today won the Sveriges Riksbank Prize in Economic Sciences or the Nobel Economics Prize for his contributions in the field of behavioural economics. The award, which is announced in memory of Alfred Nobel, went to the US-based economist for his pioneering work to bridge the gap between economics and psychology, the Royal Swedish Academy of Sciences said on Monday.
"Richard H. Thaler has incorporated psychologically realistic assumptions into analyses of economic decision-making. 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," Royal Swedish Academy of Sciences said in a press release.
Thaler was one of the founders of the field of behavioural finance, which studies how cognitive limitations influence financial markets. Thaler also shed new light on the old observation that New Year's resolutions can be hard to keep.
"In total, Richard Thaler's contributions have built a bridge between the economic and psychological analyses of individual decision-making," the award-giving body said on announcing the 9 million Swedish crown ($1.1 million) prize.
Thaler also showed how consumers' fairness concerns may stop firms from raising prices in periods of high demand, but not in times of rising costs. Thaler and his colleagues devised the dictator game, an experimental tool that has been used in numerous studies to measure attitudes to fairness in different groups of people around the world.
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.
"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."
The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It was not part of the original group of awards set out in dynamite tycoon Nobel's 1895 will.
"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 Nobel jury said in a statement.
Thaler is a professor at the University of Chicago - a school popular with the Nobel economics committee. Of 79 laureates so far, more than a third have been affiliated with the university's school of economics.
Over the weekend, Indian media was abuzz with the findings of Clarivate Analytics, a research firm, that had named Rajan among those likely to win a Nobel Prize in Economics. However, it must be noted that the Clarivate's prediction aren't time bound.