The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 2017

• Date: 01 July 2018
• Published date: 01 July 2018
• DOI: http://doi.org/10.1111/sjoe.12314

Scand. J. of Economics 120(3), 659–660, 2018

DOI: 10.1111/sjoe.12314

The Sveriges Riksbank Prize in Economic

Sciences in Memory of Alfred Nobel, 2017

Press release from the Royal Swedish Academy of Sciences

The Royal Swedish Academy of Sciences has decided to award

the Sveriges Riksbank Prize in Economic Sciences in Memory of

Alfred Nobel for 2017 to

Richard Thaler, University of Chicago, Chicago IL, USA

“for his contributions to behavioral economics”

Integrating Economics with Psychology

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.

Limited rationality: Thaler developed the theory of mental accounting,

explaining how people simplify financial decision-making by creating

separate accounts in their minds, focusing on the narrow impact of each

individual decision rather than its overall effect. He also showed how

aversion to losses can explain why people value the same item more

highly when they own it than when they don’t, a phenomenon called the

endowment effect. Thaler was one of the founders of the field of behavioral

finance, which studies how cognitive limitations influence financial markets.

Social preferences: Thaler’s theoretical and experimental research on

fairness has been influential. He showed how consumers’ fairness concerns

might 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.

Lack of self-control: Thaler has also shed new light on the old

observation that New Year’s resolutions can be hard to keep. He showed

how to analyze self-control problems using a planner–doer model, which

is similar to the frameworks psychologists and neuroscientists now use to

describe the internal tension between long-term planning and short-term

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The editors of The Scandinavian Journal of Economics 2018.