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Summary Article: Richard Thaler Influential thinker on behavioral finance from QFinance: The Ultimate Resource
LIFE AND CAREER

Richard Thaler taught at Cornell University and Massachusetts Institute of Technology Sloan School of Management, and is now Professor of Behavioral Science, Economics and Finance at the Graduate School of Business, the University of Chicago, and Director of its Center for Decision Research. He regularly consulted with Barack Obama’s economic advisor for the 2008 presidential campaign. Thaler has also organized a series of behavioral finance seminars along with Robert Shiller, another behavioral finance expert, at the Yale School of Management. He is an associate at the National Bureau of Economic Research, co-head of its Behavioral Finance Project, and is the founder of Fuller & Thaler Asset Management Inc.

KEY THINKING
  • Richard Thaler is a pioneer in behavioral economics and finance, as well as the psychology of decision-making, helping transform the study of economics by trying to understand how people behave financially.

  • He gained attention for a regular column in the Journal of Economic Perspectives on Anomalies, where he examined economic behavior that ran counter to traditional microeconomic theory.

  • He has written on a wide variety of subjects, from savings and investing, to marketing, decision-making, and financial markets. Recent papers have included an examination of behavior on the television game show, Deal or No Deal, and an analysis of the National Football League Draft.

  • He has continued to demonstrate the irrationalities inherent in the financial markets, arguing against the neoclassical view that rationality underpins the financial system.

  • In Nudge, Thaler and co-author Sunstein examine everyday factors that can influence our decisions.

  • They argue that institutions, including the government, should use the science of choice and decision-making to impel people to improve their lives, based on the insights of behavioral economics.

IN PERSPECTIVE
  • Thaler is considered to have originated the field of behavioral economics, an area of study that integrates psychological research with economic theory.

  • He developed the work of Nobel Prize-winning psychologists Daniel Kahneman and Amos Tversky, and their analysis of why people are more concerned with changes in wealth than with their absolute level.

  • This research helped explain Thaler’s work on anomalies; Kahneman cited his joint work with Thaler as a major factor in his receiving the Nobel Prize in Economics.

  • Thaler also focused on “mental accounting,” which is based on Kahneman and Tversky’s “framing” principle, which examines how the positioning of choices prejudices the outcome.

  • He proposed that most people are prone to error, irrationality, and emotion, and that they behave in ways not always consistent with maximizing their own financial wellbeing.

  • He received the Paul A. Samuelson Award for his work on the “Save More Tomorrow” project, a plan that allows employees to commit some of their future salary increases toward retirement accounts.

“We can understand much more about the behavior of markets, even financial markets, if we learn more about the behavior of the people who operate in these markets.”

Richard Thaler
Copyright © Bloomsbury Information Ltd, 2009, 2011, 2012, 2013, 2014

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1937Born in Haifa, Israel. 1961Received BA from Hebrew University. 1965Received PhD from the University of Michigan. 1966Taught at Hebre

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