Talk about wit and Richard Thaler definitely has it. He as is widely known by now is the recipient of the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017. He was asked that how would he spend the Prize money and he nicely said” I will spend it irrationally!” This article on how he came about doing behavioral work is interesting.
It is not a prize gives as per Alfred Nobel wishes as is still presumed by many. Infact the prize came as a result of the tiff between the central bank and the government over policy decisions.
This blog was initially excited by these prizes but not anymore. One has realised the follies of the Economics Prize and is not at all in the league of the other Prizes in Sciences. Infact it has made the entire subject suffer from even more hubris and arrogance.
But to see the 2017 Prize being given to Richard Thaler does bring a smile. After all, he is one of the few who has questioned this edifice of economics built so strongly on neoclassical economics. This blog has for long been a fan of behavioral economics as it provides an alternate way of thinking. It is something which one sees more often around us with people being so predictably irrational. The rationality model as is often taught and on which much of economics is built, is hardly there to see.
Likes of Thaler have been advocating Nudging units which will try and tilt policy to a more favored outcome. The idea is people are anyways being nudged into making choices so why not nudge them into the right choice? Some countries have set up their units as well (like in UK) and doing fair bit of research on these matters.
But then taken to an extreme this could be behavioral economics undoing as well. As the question is who decides what is the right choice? We are back to full circle debate between government fiat and private choices. The debate between libertarians and libertarian paternalism is far from settled.
The beauty of behavioral economics was pointing to this unpredictable human being and its irrational ways. At some level we have to accept it and let people learn from mistakes. Too much tinkering with this behavior could lead to all kinds of unintended consequences and put us under similar predicament as in a neoclassical framework.
As behavioral economics continues to become popular and more so post this prize, it has to guard itself against this very popularity.
Having said all this, will behavioral approach become part of economics curriculum? The Prizes in 2002 and 2013 for behavioral work have not been able to change the curriculum. It remains to be seen whether 2017 will make some impact. We surely need plurality in economic thinking and introducing behavioral economics should have already been done. It beats you why it remains an elective in most colleges. One obvious problem is there are not many professors around who can teach the subject.
Now this becomes a chicken and egg problem. How do we teach when we do not have enough professors? We need some rational solution towards this irrational problem…:-)
Mostly Economics 
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