Richard Thaler is an American economist and the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. He is a central figure in the development of behavioral economics and has contributed to the founding of the field of nudging, which uses insights from behavioral science to try to influence people's choices in order to improve their welfare. In 2017, he was awarded the Nobel Prize in Economics for his contributions to behavioral economics.
Thaler's research focuses on understanding how people make economic decisions that do not conform to traditional models such as expected utility theory. In particular, he has studied how mental shortcuts (heuristics) can lead people to make suboptimal decisions, how emotions affect decision-making, and how social preferences like fairness or reciprocity can impact economic outcomes. His work often takes an interdisciplinary approach, integrating insights from psychology and other social sciences into economics.
One of Thaler's most influential ideas is that humans are mental misers who attempt to conserve cognitive effort by using simple rules of thumb (heuristics) rather than engaging in more complex deliberative reasoning. This often leads them to make suboptimal decisions, as they fail to take into account all relevant information or weight it properly. Another key idea is that humans display bounded rationality, meaning that their decision-making is limited by their cognitive abilities as well as time and information constraints. As a result, they are often irrational in ways that can be predicted by psychological theories such as prospect theory or loss aversion. Finally, Thaler argues that standard economic models which assume rational agents are often misspecified because they ignore these important aspects of human behavior.
In recent years, Thaler has applied his ideas about bounded rationality and mental misers to the policy domain through the concept of nudging. The basic idea behind nudging is that small changes in environmental cues (such as default options or framing effects) can have large impacts on people's choices without restricting their freedom or requiring them to change their preferences. Nudging has been implemented in a variety of domains including retirement saving, organ donation rates, energy conservation, and healthy eating initiatives.