Nobel prize to experimental and behavioural economist Richard Thaler
This year’s Nobel Memorial Prize in Economics honours Richard Thaler, a professor from University of Chicago Booth School of Business for his research in behavioural and experimental economics. The committee argued that “By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes.”
Experimental and behavioural economics combine insights from psychology with economic decision making, to investigate underlying motivations for why individuals make certain decisions. The modi operandi in testing theories are randomised experiments, in the lab as well as in the field. Findings are highly relevant for researchers, institutions and businesses alike.
Thaler has co-authored the book “Nudge: improving decisions about health, wealth, and happiness”, together with Cass Sunstein, applying insights from behavioral economics to welfare-increasing policy ideas. Nudges are intended to be minimally invasive, and intended to help individuals in overcoming their own limitations. A simple example of a nudge is a default option to save. An individual might find it difficult to save actively every month, he or she might either spend the money before being able to save it, or simply forget about saving altogether. A default option in his or her deposit account could be to automatically save a certain amount every months as soon as the wage is transferred. If the money is locked up for a certain amount of time, such a nudge can help the individual to save before he or she could spend the money otherwise.
Oslo Economics has both knowledge and experience with the planning and implementation of laboratory, as well as artificial and natural field experiments, primarily in public sector optimisation (for example in collaboration with NAV and Skatteetaten). However, experiments and experimental results are equally beneficial and relevant for both the public and the private sector. Experiments allow for testing the effectiveness of several options to reach a certain goal, when it is ex ante unclear which option one should choose. Experiments thus constitute an excellent tool for evidence-based decision making.
The experiment in collaboration with Skatteetaten was published in the Harvard Business Review in July this year, accessible here.