"Dick's strong suit is this incredible, intuitive, innovative capacity to look at human economic behavior and see its quirks -- and then make some good social science out of it," Wanner said.
Eventually, Thaler landed a regular column about economic oddities in the well-respected Journal of Economic Perspectives. The columns, which ran from 1987 to 1990, "were beautifully written, and they tended to be quite funny," Kahneman said. "I think that got behavioral economics started as a field. Then, it became respectable."
Nicholas Barberis, a behavioral finance professor at Yale University, said the difficult early days should not be overlooked. "It is only now that he is rightly lionized," he said of Thaler. "He took a lot of hits back then, but he paved the way and made life much easier for the next generation of behavioral scholars."
Said Thaler: "I don't want to give the impression that life has treated me unfairly. It's obviously not true. I have a great job at a top university, live a good life. But like all new ideas, it was a struggle to get it accepted."
A growing influence
Through the 1980s and 1990s, Thaler evangelized behavioral economics, carefully choosing research to advance the field.
"I always say that one of the things that makes him great is he doesn't like to work," Kahneman said. "He hits only home runs, because the small stuff isn't worth his time. If you want to tease him, you'll say he's lazy, but if you want to praise him, you'll say he has very good taste in problems. He's very selective in the things he invests energy in."
Along the way, Thaler also contended that behavioral economics applies to financial markets, and a related field became known as behavioral finance. Indeed, Thaler is a principal of Fuller & Thaler Asset Management, a California firm that manages money for pension funds and other clients. It attempts to make money by investing in stocks that are mispriced because investors have biased expectations about a firm's future.
Russell Fuller, who conducts daily operations of the firm, said Thaler has changed the economics profession. "People now accept that you have to think about human behavior when you're thinking about economics ... that's a major contribution," Fuller said. "He doesn't write papers that are full of math. He writes papers that are full of common sense."
As behavioral economics gained approval, applying it to governments and other organizations of power became a natural progression. And it was a way to help people make better decisions, given their sometimes irrational natures.
That's what Thaler's best-selling book was largely about.
"Nudge" was born during lunch at a booth in the back of the restaurant Noodles Etc. on East 57th Street in Chicago. That's where Thaler and Sunstein, then a law professor at the University of Chicago, discussed an odd term Thaler had come up with, "libertarian paternalism," a combination of seemingly opposite ideas. The phrase attempted to describe how a government or employer could structure choices for people so they were more likely to make good decisions.
In short, people would receive a "nudge."
Skeptics say the whole thing sounds socialistic, that you can't trust employers and government to be benevolent or competent enough to guide choices. That may be true, Thaler said, but any method of presenting options to consumers will inherently influence what they choose. Given a list of choices, for example, people will often choose the first one whether it's good or not. So you might as well design a system that will likely lead to something good.
For example, most people agree that saving for retirement is good. But many young workers don't sign up for their employer's plan. What if employers made enrollment in a 401(k) plan automatic for new employees, requiring them to opt out if they didn't want to participate? By changing the 401(k) default from opt-in to opt-out, participation grows.
Thaler, with frequent collaborator Shlomo Benartzi, went a step further with "Save More Tomorrow," which invites participants to commit in advance to a series of automatic retirement contribution increases, timed to coincide with pay raises. That way, workers contribute more to savings but never see their take-home pay decrease.
The idea has been adopted by thousands of employer retirement plans, with an estimated 9 million workers enrolled.
"He has successfully challenged the assumption of economic theory, and, more importantly, he has explained otherwise unexplainable phenomena in the market," Kahneman said. "He has provided a framework for understanding what happens when the housing market dries up, for understanding why people don't save enough, for why negotiations quite often fail."
Kahneman cites Thaler's idea of applying behavioral economics to public policy as yet another major contribution.
Will his numerous accomplishments be enough to earn that Nobel Prize one day?
"The Nobel Prize in economics is typically awarded at least 30 years after the research has been published, so at my age there is nothing I can do to increase my chances," Thaler said. "As a result, I devote more time to filling in my NCAA basketball bracket than to worrying about whether I will win a Nobel Prize."
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Richard Thaler, the Ralph and Dorothy Keller Distinguished Service Professor of Economics and Behavioral Science at the Booth School of Business, University of Chicago.
Personal: Father of three by his first marriage. Married to France Leclerc, a former marketing professor at the University of Chicago.
On wine: Thaler belongs to a wine-tasting group, although he says his wife has the expert palate. But don't call him a wine collector. "My view is the purpose is to drink it. At my age, what that means is there are some kinds of wines I no longer buy because they are wines that I don't like to drink until they're 20. ... I'm now in the drawing-down-inventory phase."
Odd pairing: One of Thaler's frequent golf partners is Eugene Fama. Fama, also a U. of C. economics professor, is known as the father of the "efficient market hypothesis." Each man is world-renowned, but for contradictory points of view. They once warned a young guest they'd be quizzing him for 18 holes about economics, until Thaler let him off the hook: "I told him he shouldn't worry because we won't agree on any of the answers." Another golf partner: "Freakonomics" author Steven Levitt.
On prospects for a Nobel Prize: "Having been invited by my friend Daniel Kahneman to join his entourage when he won in 2002, I can tell you that the Swedes throw a great party. So if they do call, I will not turn it down."
Richard Thaler, Keller Professor of Economics and Behavioral Science, Booth School of Business
U. of C. professor spent years convincing peers that economics is more than math
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