Author information:
Gábor Neszveda: Corvinus University of Budapest, Assistant Lecturer. E-mail: gabor.neszveda@uni-corvinus.hu
Abstract:
Richard Thaler was awarded the Nobel Memorial Prize in Economic Sciences in 2017 for his contribution to behavioural economics. The main purpose of behavioural economics is to build a bridge between economic thinking and the results of psychological research. Below, I present the fields where the work of Thaler stands out the most, such as limited rationality, lack of self-control and social preference. In addition, his findings also laid the foundations for behavioural finance. His unwavering, successful and high-standard research over more than forty years has laid the foundations for a number of new research directions, not only in sciences. The elaboration of the theory of libertarian paternalism, among others, is also associated with his name, which has substantially shaped many decision-makers and regulations over the past decade.
Cite as (APA):
Neszveda, G. (2018). The Contribution of Thaler to Behavioural Economics. Financial and Economic Review, 17(1), 153–167. https://doi.org/10.25201/FER.17.1.153167
Column:
Essay
Journal of Economic Literature (JEL) codes:
D03, D90, G02, G40
Keywords:
behavioural economics, behavioural finance, limited rationality, social preference, lack of self-control, Nobel Memorial Prize
References:
Ainslie, G. W. (1974): Impulse Control in Pigeons. Journal of the Experimental Analysis of Behavior, 21(3): 485–489. https://doi.org/10.1901/jeab.1974.21-485
Ambrus-Lakatos, L. – Meszerics, T. (2003): Az ultimátumjáték elemzéséhez (For the analysis of the Ultimatum Game). Közgazdasági Szemle, 50(6): 505–518.
Baksay, G. – Palotai, D. (2017): Válságkezelés és gazdasági reformok Magyarországon (Crisis management and economic reforms in Hungary), 2010–2016. Közgazdasági Szemle, 44(4): 698–722.
Barberis, N. – Huang, M. (2001): Mental Accounting, Loss Aversion and Individual Stock Returns. The Journal of Finance, 56(4): 1247–1292. https://doi.org/10.1111/0022-1082.00367
Becker, G. S. (1974): A Theory of Social Interactions. Journal of Political Economy, 82(6): 1063–1093. https://doi.org/10.1086/260265
Benartzi, S. – Thaler, R. H. (1995): Myopic Loss Aversion and the Equity Premium Puzzle. The Quarterly Journal of Economics, 110(1): 73–92. https://doi.org/10.2307/2118511
Benartzi, S. – Thaler, R. H. (2013): Behavioural Economics and the Retirement Savings Crisis. Science, 339(6124): 1152–1153. https://doi.org/10.1126/science.1231320
Benartzi, S. – Beshears, J. – Milkman, K. L. – Sunstein, C. R. – Thaler, R. H. – Shankar, M. –
W. Tucker-Ray – W. J. Congdon – Galing, S. (2017): Should Governments Invest More in Nudging? Psychological Science, 28(8): 1041–1055. https://doi.org/10.1177/0956797617702501
Bondt, W. F. – Thaler, R. (1985): Does the stock market overreact? The Journal of Finance, 40(3): 793–805. https://doi.org/10.1111/j.1540-6261.1985.tb05004.x
Camerer, C. – Babcock, L. – Loewenstein, G. – Thaler, R. (1997): Labor Supply of New York City Cabdrivers: One Day at a Time. The Quarterly Journal of Economics, 112(2): 407–441. https://doi.org/10.1162/003355397555244
Chetty, R. – Friedman, J. N. – Leth-Petersen, S. – Nielsen, T. H. – Olsen, T. (2014): Active vs. Passive Decisions and Crowd-out in Retirement Savings Accounts: Evidence from Denmark. The Quarterly Journal of Economics, 129(3): 1141–1219. https://doi.org/10.1093/qje/qju013
Engel, C. (2011): Dictator Games: A Meta Study. Experimental Economics, 14(4): 583–610. https://doi.org/10.1007/s10683-011-9283-7
Fama, E. F. (1970): Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2): 383–417. https://doi.org/10.2307/2325486
Fehr, E. – Gächter, S. (2000): Fairness and Retaliation: The Economics of Reciprocity. Journal of Economic Perspectives, 14(3): 159–181. https://doi.org/10.1257/jep.14.3.159
Fehr, E. – Schmidt, K. M. (1999): A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114(3): 817–868. https://doi.org/10.1162/003355399556151
Fömötör, B. – Parádi-Dolgos, A. – Sipiczki, Z. (2017): Behavioural Finance and Consumer Loan Contracts. Financial and Economic Review, 16(2): 156–169. http://doi.org/10.25201/FER.16.2.156169
Golovics, J. (2015): Bounded rationality and altruism: behaviourism in economics. Financial and Economic Review, 14(2): 158–172. http://english.hitelintezetiszemle.hu/letoltes/6-golovics-en.pdf
Infante, G. – Lecouteux, G. – Sugden, R. (2016): Preference Purification and the Inner Rational Agent: a Critique of the Conventional Wisdom of Behavioural Welfare Economics. Journal of Economic Methodology, 23(1): 1–25. https://doi.org/10.1080/1350178X.2015.1070527
Johnson, E. J. – Goldstein, D. (2003): Do Defaults Save Lives? Science, 302(5649): 1338–1339. https://doi.org/10.1126/science.1091721
Kahneman, D. – Knetsch, J. L. – Thaler, R. H. (1986): Fairness and the Assumptions of Economics. Journal of Business, 59(4): 285–300. https://doi.org/10.1086/296367
Kahneman, D. – Knetsch, J. L. – Thaler, R. H. (1990): Experimental Tests of the Endowment Effect and the Coase Theorem. Journal of Political Economy, 98(6): 1325–1348. https://doi.org/10.1086/261737
Kolozsi, P.P. – Banai, Á. – Vonnák, B. (2015): Phasing out household foreign currency loans: schedule and framework. Financial and Economic Review, 14(3): 60–87. http://english.hitelintezetiszemle.hu/letoltes/3-kolozsi-banai-vonnak-en.pdf
Konow, J. (2000): Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions, American Economic Review, 90(4): 1072–1091. https://doi.org/10.1257/aer.90.4.1072
Laibson, D. (1997): Golden Eggs and Hyperbolic Discounting. The Quarterly Journal of Economics, 112(2): 443–478. https://doi.org/10.1162/003355397555253
Lakatos, M. (2016): A befektetői túlreagálás empirikus vizsgálata a Budapesti Értéktőzsdén (Empirical study of investor overreaction on the Budapest Stock Exchange). Közgazdasági Szemle, 43(4): 762–786.
Madrian, B. C. – Shea, D. F. (2001): The Power of Suggestion: Inertia in 401 (k) Participation and Savings Behavior. The Quarterly Journal of Economics, 116(4): 1149–1187. https://doi.org/10.1162/003355301753265543
Mehra, R. – Prescott, E. C. (1985): The Equity Premium: A Puzzle. Journal of Monetary Economics, 15(2): 145–161. https://doi.org/10.1016/0304-3932(85)90061-3
Neszveda, G. – Dezső, L. (2012): A kvázi- és általánosított hiperbolikus diszkontálás hosszú távon (Quasi-and generalised hyperbolic discounting in the long run). Szigma, 43(3–4): 163–177.
Odean, T. (1998): Are Investors Reluctant to Realize their Losses? The Journal of Finance, 53(5): 1775–1798. https://doi.org/10.1111/0022-1082.00072
Royal Swedish Academy of Sciences (2016): Scientific Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017 – Richard H. Thaler: Integrating Economics with Psychology. 1–37.
Samuelson, P. A. (1937): A Note on Measurement of Utility. The Review of Economic Studies, 4(2): 155–161. https://doi.org/10.2307/2967612
Sen, A. K. (1977): Rational Fools: A Critique of the Behavioral Foundations of Economic Theory. Philosophy & Public Affairs, 6(4): 317–344.
Shefrin, H. M. – Thaler, R. H. (1988): The Behavioral Life-cycle Hypothesis. Economic inquiry, 26(4): 609–643. https://doi.org/10.1111/j.1465-7295.1988.tb01520.x
Smith, A. (1759): Theory of Moral Sentiments. Millar Press. https://doi.org/10.1093/oseo/instance.00042831
Strotz, R. H. (1955): Myopia and Inconsistency in Dynamic Utility Maximization. The Review of Economic Studies, 23(3): 165–180. https://doi.org/10.2307/2295722
Sugden, R. (2013): The Behavioural Economist and the Social Planner: to Whom Should Behavioural Welfare Economics be Addressed? Inquiry, 56(5): 519–538. https://doi.org/10.1080/0020174X.2013.806139
Thaler, R. H. (1980): Toward a Positive Theory of Consumer Choice. Journal of Economic Behavior and Organization, 1(1): 39–60. https://doi.org/10.1016/0167-2681(80)90051-7
Thaler, R. H. (1981): Some Empirical Evidence on Dynamic Inconsistency. Economics Letters, 8(3): 201–207. https://doi.org/10.1016/0165-1765(81)90067-7
Thaler, R. H. (1985): Mental Accounting and Consumer Choice. Marketing Science, 4(3): 199–214. https://doi.org/10.1287/mksc.4.3.199
Thaler, R. H. – Shefrin, H. M. (1981): An Economic Theory of Self-control. Journal of Political Economy, 89(2): 392–406. https://doi.org/10.1086/260971
Thaler, R. H. – Sunstein, C. R. (2003): Libertarian Paternalism. American Economic Review, 93(2): 175–179. https://doi.org/10.1257/000282803321947001
Thaler, R. H. – Sunstein, C. R. (2008): Nudge: Improving decisions about health, wealth, and happiness. Constitutional Political Economy, 19(4): 356–360. https://doi.org/10.1007/s10602-008-9056-2
Tuncel, T. – Hammitt, J. K. (2014): A New Meta – Analysis on the WTP/WTA Disparity. Journal of Environmental Economics and Management, 68(1): 175–187. https://doi.org/10.1016/j.jeem.2014.06.001
Tversky, A. – Kahneman, D. (1974): Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157): 1124–1131. https://doi.org/10.1126/science.185.4157.1124
Tversky, A. – Kahneman, D. (1981): The Framing of Decisions and the Psychology of Choice. Science, 211(4481): 453–458. https://doi.org/10.1126/science.7455683
Tversky, A. – Kahneman, D. (1992): Advances in Prospect Theory: Cumulative Representation of Uncertainty. Journal of Risk and Uncertainty, 5(4): 297–323. https://doi.org/10.1007/BF00122574
Vigna, S. D. – Malmendier, U. (2006): Paying not to go to the gym. The American Economic Review, 96(3): 694–719. https://doi.org/10.1257/aer.96.3.694