Prize-Winning Behavioral Economics

Earlier this month, Professor Richard Thaler at the University of Chicago Booth School of Business won the 2017 Nobel Prize in Economics. Professor Thaler’s work in behavioral economics has impacted our understanding of human behavior, and has also influenced government's’ approach to behavior as well.

 

A recent article in the New York Times explains some of Thaler’s work and contributions. Standard economic theory assumes that human beings behave “rationally.” Economists knew this was not precisely true, but operated on this assumption for a long time. Professor Thaler pushed the field to try to truly model human behavior by observing the fact that humans consistently behave in ways that deviate from what is expected - in other words, even if people behave “irrationally,” we can still model and predict their behavior.

 

Professor Thaler has found, for example, that people who own a good will value it much more than other people who do not own that good. This is called the endowment effect. This could suggest, for example, that people who own fitness technology or pedometers might value them more than other people do. If they value them more, Thaler’s work suggests that people may be more likely to use them.

 

Thaler also found that people will punish what they perceive to be unfair behavior, “even if they do not benefit from doing so.” It would be interesting to see the link between this sort of behavioral finding and application to health care and children’s health. Since there are so many actors involved in children’s health - the children themselves, providers, teachers, public officials, parents and guardians, and more - unfair practices or policies could be a real complaint that affects relationships between these actors.

 

Thaler hopes that behavioral economics, now part of mainstream economics, will move beyond the discipline alone to become an integral part of how we think about human behavior. More research in its intersection with health and children’s healthcare will be very exciting to see!