The Next Generation Economics

“In order to do good economics, you have to keep in mind that people are human.” (R. Thaler)

Today, after many decades we have the privilege to know economics in a psychological framework because of collective efforts of many researchers, one among them being Richard Thaler, an American Economist and a distinguished professor of Chicago Booth School of Business. He is a 2017 Nobel Laureate and has made great contributions in documenting, emphasizing and relentlessly defending the theory behind anomalies based on experimental and field evidences of his psychological realistic models which further shaped into creating a human touch in economics.

His initial interest in behavioral grew when he was working on estimating economic value of a human life in graduate school. He studied how can wages across professions affect with different rates of accidental death. He was taking the usual traditional approach to estimate the economic value when suddenly he thought of taking a different approach via surveys. He sent out surveys asking participants to quantify the amount they were ready to pay to reduce their probability of death. The results were strikingly different from traditional economic approach and that unleashed the era of behavioral economics and his first encounter with the "endowment effect".

He introduced a more pragmatic understanding of human behavior into the science of economics which has helped in shaping public policy and decisions making of the government.

His introduction of emotions in decision making is indeed a new perspective in role of judgment and decision making biases in economics. His ideas like bounded rationality, lack of self-control and nudges gave way to a new generation economics- emotional rationality.He is indeed the father of new generation economics!