NEW YORK -- Richard H. Thaler of the University of Chicago was awarded the Nobel Prize in economics on Monday for his contributions to the field of behavioral economics.
Thaler was cited for his research in the psychology of economic decision-making.
His theory explains "how people simplify financial decision-making by creating separate accounts in their minds, focusing on the narrow impact of each individual decision rather than its overall effect," the Royal Swedish Academy of Sciences said.
The Royal Swedish Academy of Sciences every year awards the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
Last year, two foreign-born American professors were awarded the prize for their contributions to contract theory -- the agreements that shape business, finance and public policy.
The winners were Oliver Hart, now 69, a British born economist teaching at Harvard, and Bengt Holmström, 68, a Finnish economist teaching at MIT.
Hart's research had found that that privatizing government functions such as schools, hospitals and prisons lead to a reduction in quality greater than the advantages of cost savings. Holmström's research focused on employment contracts, including between CEOs and shareholders.
The 2013 award went to Robert Shiller, known for his work on bubbles in financial and real estate markets. His name is on a closely followed measure of U.S. home prices.
And the 2008 prize went to Paul Krugman, a liberal columnist for The New York Times and a Princeton professor who won for his work on trade patterns and location of economic activity.
Chicago Mayor Rahm Emanuel released the following statement:
"Congratulations to University of Chicago's Richard Thaler for being honored with the Nobel Prize in Economic Sciences. With his groundbreaking work in behavioral economics, Dr. Thaler is building on Chicago's long legacy of pioneering thinkers, researchers and scholars whose ideas and insights have earned them the distinction of Nobel Laureate and changed the way we see the world."
Thaler also made an appearance in the 2015 film "The Big Short." In it, he explained the "Hot Hand" fallacy to actress Selena Gomez:
Hundreds of people packed the school Monday morning to honor Thaler for this achievement.
“Todays’ prize does compensate a little bit for my disappointment at the Oscars two years ago,” he said.
While he didn’t get the Oscar recognition he joked about for his role alongside Gomez, he was still a winner.
“I’m pretty sure this is the first time the president and dean have had a conversation about me when the phrase ‘pain in the ass’ was not mentioned which I’m grateful,” he said.
Thaler has written several best-selling books about how people’s financial decisions are not always rational.
He’s been teaching students his studies at Booth for more than 20 years.
I’ve used the strategy of corrupting youth whose minds are not already made up
The Noble Prize comes with $1.1 million dollars.
So what is he going to do with the money? You probably won’t find him gambling with it. But Thaler joked he intends to spend it as irrationally as possible.
“Any time I spend any money that’s really fun, I’m going to say that came from the Nobel Prize,” he said.