Nobel prize in economics awarded to Richard Thaler | World news

One of the founding fathers of “nudge” theory, which has helped boost British tax receipts and encouraged smokers to become vapers, has been awarded the 2017 Nobel prize for economics.

Richard Thaler co-wrote a bestselling book on the nudge concept read by politicians around the world and soon had them embracing the notion that people can be influenced by prompts – such as changing the wording of tax demands – to alter their behaviour.

As well as tweaking the sentences in tax reminder letters to increase HMRC takings, Thaler’s branch of economics has influenced Theresa May’s announcement of an “opt out” policy for organ donations where it is presumed that people wish to donate body parts unless they state otherwise. The Department of Health has also adopted nudge principles in its approach to e-cigarettes.

The Nobel committee said the 72-year-old, who made a guest appearance in the 2015 credit crunch film The Big Short with Selena Gomez, has provided a “more realistic analysis of how people think and behave when making economic decisions.” Asked what he planned to do with his 9m krona (£840,000) prize money, Thaler joked that he intended to spend it “as irrationally as possible”, in a nod to his work showing how people’s choices on economic matters are not always rational.

Nudging stems from the field of behavioural economics, examining how gut instincts can often overrule rational choices, in which Thaler is regarded as a pioneer.

The US academic, who is a professor at the University of Chicago, has previously suggested that Brexit could be an example of behavioural economics in action. He argued British voters chose an economically irrational route when considering the options put to them by elites and the mainstream media.

Richard Thaler and Selena Gomez in the Big Short.



Richard Thaler and Selena Gomez in the Big Short. Photograph: Paramount

“Personally I think a vote to leave is a highly risky move. Most voters aren’t really thinking about it in a very analytical way,” he said in an interview before the referendum last year.

Thaler co-wrote the global bestselling book Nudge: Improving Decisions about Health, Wealth, and Happiness in 2008 with the US professor Cass Sunstein, which brought the theory to wider attention. He was an adviser on the creation of the “nudge unit” at the heart of Whitehall initiated as a pet project by David Cameron in the earliest days of his premiership from 2010 in the coalition government.

The unit was initially focused on public health issues such as obesity, alcohol intake and organ donation, although its scope has ballooned to cover everything from pensions and taxes to mobile phone theft and e-cigarettes. Formally called the Behavioural Insights Team, but widely known after Thaler’s book, the nudge unit is credited with encouraging 100,000 extra organ donations a year and persuading 20% more people to consider changing energy provider.

Thaler is a leading voice on how nudging can tackle problems in society, although retailers often employ behavioural economics to encourage greater sales by making small changes to alter the buying habits of consumers.

The academic has previously said the Ponzi scheme fraudster Bernie Madoff was a master in winning people’s confidence, and could have written a similar book showing how to use nudge theory for personal gain.

Nudge theory has been criticised by some sections of the political right for being overly paternalistic, while it has also been described as a neoliberal idea by the left because it relies on individual choice instead of overt state intervention. Unlike the field of classical economics – whereby decision-making is based on cold-headed logic – behavioural economics allows for irrational actions and attempts to understand why this might be the case. The concept can be applied in miniature to individual situations, or more broadly to encompass the wider actions of a society or trends in financial markets.

Thaler becomes the latest American economist to win a prize increasingly dominated by US citizens, now accounting for roughly half of laureates since the inception of the Nobel prize in economic sciences in 1968.

Women are significantly underrepresented in the economics prize compared with some of the other Nobel awards, such as those given for peace or literature. The US political economist Elinor Ostrom, who died in 2012, remains the only woman to have won the award. She shared the prize in 2009 with fellow US academic Oliver Williamson for her work exploring how people manage collective resources.

The award for economics is not among the Nobel Foundation’s official awards for literature, peace, medicine, physics and chemistry, but was established separately by Sweden’s central bank, Sveriges Riksbank, in memory of the Swedish chemist Alfred Nobel.

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Nobel economics prize due to be announced | World news

The former governor of the Reserve Bank of India and a string of American academics are among potential candidates for the Nobel prize for economics, due to be announced on Monday in Stockholm.

The 9m Swedish kronor (£848,091) prize is not among the Nobel Foundation’s official awards for literature, peace, medicine, physics and chemistry but was established separately by Sweden’s central bank, Sveriges Riksbank, in memory of the Swedish inventor Alfred Nobel.

The Swedish Academy of Sciences will announce the Sveriges Riksbank prize in economic sciences in a climate in which economists – and other experts more generally – are under pressure from rising populism, while neoliberal economics, advocating free markets, individualism and minimal state intervention, is increasingly discredited.

There have been 78 previous winners of the cash prize and medal which has become a significant honour for economists since it was initiated in 1968. Women are significantly underrepresented compared with some of the other Nobel prizes, such as those given for peace or literature. The American political economist Elinor Ostrom, who died in 2012, remains the only woman to have won the award. She shared the prize in 2009 with fellow American academic Oliver Williamson for her work exploring how people manage collective resources.

The prize was won last year by UK-born Oliver Hart of Harvard University and Bengt Holmström of the Massachusetts Institute of Technology for their work on contract theory, covering a range of issues from executive pay to public-private partnerships.

The decision-making committees choose candidates in secret, with details of the process for each round kept under wraps for 50 years. However, the research company Clarivate Analytics has come up with a list of potential candidates based on analysis of academic citations.

Colin Camerer and George Loewenstein

The California Institute of Technology’s Camerer and the Carnegie Mellon University’s Loewenstein may win for their research into behavioural and experimental economics.

The academics are pioneers in the field of behavioural economics, with their research focusing on the connections between economic decisions, neuroscience and psychology.

Their analysis includes examinations of why people might make risky investments, the links between emotions and decision-making, and how markets might be susceptible to price bubbles.

Robert Hall

The professor of economics at Stanford University in California could win the prize for his analysis of worker productivity, studies of recessions and unemployment.

His work is particularly important in the wake of the financial crisis, as the global economy lurched into reverse before starting to recover – which still poses problems for governments and central banks to this day.

His recent work has shown that during a recession, unemployment does not increase because of a sharp rise in companies cutting jobs. Instead, it rises because jobseekers require longer to find new work.

Michael Jensen, Stewart Myers, Raghuram Rajan

The group of academics are singled out for their contributions to the study of decisions in corporate finance, including the complex factors behind the choices of individuals and organisations.

Jensen is professor of business administration at Harvard University and has focused his research on corporate governance, executive pay and incentives.

Myers is the Robert Merton professor of finance at the MIT Sloan School of Management. His research focuses on the valuation of assets and corporate finance, as well as the government regulation of business.

Rajan is the former governor of the Reserve Bank of India, having left the central bank last year to become professor of finance at the Booth School of Business at the University of Chicago.

A former chief economist and director of research at the International Monetary Fund, he is interested in economic development, banking and corporate finance.

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Britons shunning two-week holidays in favour of short breaks | Business

Britons have ditched the traditional two-week holiday in favour of shorter breaks as no-frills airlines have taken off over the last 20 years, according to official figures that also confirm the demise of the booze cruise.

A review of travel trends since the mid-1990s by the Office for National Statistics highlighted a dramatic rise in the number of holidays taken by UK residents. In 2016, they went on more than 45m foreign holidays, up from 27m in 1996. That was a 68% increase, while the UK population rose by 12% in the same period.

The ONS also found that seven- and 10-day holidays had become more popular than 14-day breaks.

ONS
(@ONS)

Since the 1990s, we’re going on more holidays… but they’re shorter than they used to be https://t.co/ixX4S2GbdD pic.twitter.com/yPOMfwTgSy


August 7, 2017

The types of holidays taken had also changed over those two decades, statisticians found. But there was little difference in Britons’ top destinations. Spain and France remained the most popular, albeit with a dip in journeys to France.

“One of the biggest changes we’ve seen over the last 20 years is the marked decline in the popularity of two-week holidays and the rise of short breaks,” the ONS said in a travel roundup released as many people head off for their summer breaks.

“The week-long break is a lot more popular than before, and there’s also been an increase in the number of holidays lasting 10 nights.”

Holiday durations

One of the most likely explanations for UK residents going on more but shorter holidays was the growth of budget airlines, the ONS said.

Throughout the 1980s and 1990s, EU leaders relaxed the rules to create a common aviation area across Europe, allowing low-cost carriers such as easyJet and Ryanair to enter the market, it noted. Between 1996 and 2015 – the most recent figures available – passenger numbers at UK airports increased by 85%, from 135m to 251m.

The Association of British Travel Agents (Abta) said its figures also showed that cheaper flights and greater flexibility by travel companies had driven a shift away from the standard two-week break in the sun and a rise in shorter breaks. The group also highlighted a rise in city breaks thanks to the EU’s Europe-wide “open skies” regulation.

Commenting on the ONS figures, an Abta spokeswoman said: “These stats are a reflection of how far we have come in 20 years and how important it is that we keep similar agreements in place post-Brexit.”

The ONS travel roundup also highlighted a steep decline over the past two decades in people travelling abroad and returning the same day. There were more than 2m trips with no overnight stay in 1996 but only 363,000 last year.

“This could be because many of these visits were booze cruises – journeys across the English Channel to stock up on alcohol and cigarettes – which are no longer as cost-efficient as they used to be,” the ONS said.

“Duty-free sales within the EU ended in 1999, France has been ratcheting up the price of cigarettes since 2000, and in recent years the pound has fallen in value against the euro.”

Shoppers with trolleys of alcohol in a Calais hypermarket



Booze cruises to mainland Europe have become less popular as prices have risen in France and elsewhere. Photograph: Gary Calton for the Observer

While the general trend from 1996 to 2016 was a sharp rise in the number of holidays taken, the travel industry has faced tougher times since last summer’s Brexit vote. The pound fell sharply after the referendum, making overseas holidays more expensive and prompting some Britons to opt for staycations. The pound dropped to a 10-month low against the euro of about €1.10 on Monday.

The consultancy Deloitte said its latest research showed holiday spending had risen in the second quarter of this year from the first. But comparing consumer habits with a year ago showed the general pressures on household budgets from higher living costs.

“While spending on holidays was up quarter on quarter, the longer-term trend shows that it has fallen year on year,” said Simon Oaten, a partner for hospitality and leisure at Deloitte.

“These are the first signs of a weakening in consumer confidence with regards to their holiday spending, and it remains to be seen whether this proves to be a blip or the start of a prolonged slowdown that echoes what we have seen in other areas of the consumer market.”

Comparing the most popular holiday destinations in 1996 and 2016, the ONS report found Britons’ love affair with Spain had bloomed, with the number of holidays taken there annually up by 87% in 20 years. France was one of the few countries that UK tourists were now visiting less than in 1996, with the number of holidays there down 9%.

Seeking to explain the change, the ONS said: “Budget airlines may be behind this too: rather than driving to France on a ferry (the number of holidaymakers travelling by sea has declined by 33% since 1996), tourists are perhaps opting for a cheap flight elsewhere instead.”

Top 10 holiday destinations

Germany joined the top 10 destinations for UK holidaymakers and another new entry was cruising, which was four times as popular as it was 20 years ago. “This could be due to an ageing population, with increasing numbers of older people in the population,” the ONS said.

Two destinations that dropped out of the top 10 since 1996 were Belgium and Turkey. Outside the top 10, places that had grown in popularity since the 1990s included the United Arab Emirates, thanks to a jump in trips to Dubai. There was also an increase in visits to Iceland, starting about 2010, the ONS said.

“2010 was also the year that the volcano Eyjafjallajökull erupted, sending clouds of ash into the skies above Europe and grounding planes across the world, and some think that the TV pictures of Iceland shown around the globe encouraged visitors to go there,” it added.

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