Psychology in the service of economy

Abstract

Richard Thaler, a contemporary American economist and professor of behavioral economics at the University of Chicago, won the 2017 Nobel Memorial Prize in Economic Sciences. He broadened the scope of economic analysis and made it more sophisticated by examining three psychological traits systematically influencing economic decisions, i.e. limited rationality, perception of fairness and lack of self-control. Thus, in the 1980s Thaler advanced his 'economic theory of self-control' which describes economic phenomena, especially decision-making, in terms of people's inability to control their impulses. In the numerous papers and books that he published in this relatively young field of economics, Thaler introduced the terms like 'nudge' and 'choice architecture', and developed the so-called theory of 'mental accounting'.

Keywords

• Richard Thaler
• Nobel Prize
• behavioral economics
• psychology
• decision-making
• nudge
• mental accounting
• limited rationality
• perception
• self-control