By Binyamin Appelbaum
Oct. 9, 2017 193 comments
WASHINGTON — Richard H. Thaler, whose work has persuaded many economists to pay more attention to human behavior, and many governments to pay more attention to economics, was awarded the Nobel Memorial Prize in Economic Sciences on Monday.
Professor Thaler is the rare economist to win a measure of fame before winning the prize. He is an author of a best-selling book, “Nudge,” about helping people to make better decisions. He also appeared in the 2015 film “The Big Short,” delivering what is surely one of the most widely viewed tutorials in the history of economics, on the causes of the 2008 financial crisis.
The Nobel committee, announcing the award in Stockholm, said that it was honoring Professor Thaler for his pioneering work in establishing that people are predictably irrational — that they consistently behave in ways that defy economic theory. People will refuse to pay more for an umbrella during a rainstorm; they will use the savings from lower gas prices to buy premium gasoline; they will offer to buy a coffee mug for $3 and refuse to sell it for $6.
The committee credited Professor Thaler, who teaches at the University of Chicago Booth School of Business, for moving economics toward a more realistic understanding of human behavior, and for using the resulting insights to improve public policies, notably a sweeping shift toward the automatic enrollment of employees in retirement savings programs.
“Despite the spectacular growth of index funds — passive investment vehicles that track market averages and minimize transaction costs — millions of amateur investors continue to actively buy and sell securities regularly. This despite overwhelming evidence that even professional investors are no more likely to beat the market than monkeys throwing darts at securities listings.
Money managers, at least, are paid to make investment bets. But why do amateurs believe they can outperform the professionals — or even identify those pros who will outperform? (Performance of individual mutual funds cannot be predicted with any greater degree of accuracy than individual stocks or bonds.) Many biases and cognitive errors contribute to this costly behavior, but a few deserve mention.”
“New Yorkers, if not city dwellers everywhere, might acknowledge a debt to Pope Francis this week. He has offered a concrete, permanently useful prescription for dealing with panhandlers.It’s this: Give them the money, and don’t worry about it.
The pope’s advice, from an interview with a Milan magazine published just before the beginning of Lent, is startlingly simple. It’s scripturally sound, yet possibly confounding, even subversive.Living in the city — especially in metropolises where homelessness is an unsolved, unending crisis — means that at some point in your day, or week, a person seeming (or claiming) to be homeless, or suffering with a disability, will ask you for help.
You probably already have a panhandler policy. . . . .”
Here is the top comment:
As a Catholic seminarian and, hopefully, a future priest, I am simultaneously inspired and unsettled by the teachings of Pope Francis. Inspired because, like his namesake, he fervently preaches and lives out the Gospel by his actions and not only his words, particularly in solidarity with the marginalized of our world. By the same token, his actions and words are unsettling because it reminds me that I, too, am called to live out the Gospel in this very difficult and radical way.
This editorial really gets to me. I have a fancy set of rules, which meant that I do not give to pan handlers very often. I need to revisit these ideas, while continuing to strive to give more to family planning and environmental organizations.
Great news from the work of Esther Duflo at JPAL/MIT, and Dean Karlan at Innovations for Poverty Action. Thank you Saint Nicholas.
These economists and their colleagues are using micro-finance, randomized trials and psychology to show what works and what doesn’t in the war on poverty — very exciting.
The dark side to such valiant efforts, is that population growth makes their efforts less useful. Without education, family planning, and population control, all those donated animals will soon be eaten.