The 2017 Nobel Memorial Prize in Economic Sciences goes to Richard Thaler for his contribution in understanding how people make financial decisions, popularly called Behavioral Economics.
I remember when I was a new PhD Student back in 2001, not knowing what the focus of my thesis should be. Being asked to choose a topic was like walking into a pitch black room not being able to discern or see anything. You know when it makes no difference if your eyes are open or closed. I was at a complete loss. “Write about whatever you want” was the advice I got. But I knew too little to know what I wanted. “Let’s go to the States, to the most prestigious Finance conference there is” said another college. We went there to listen to the best and to get inspired.
I remember going to every session I could at the 2002 American Finance Associations conference in Atlanta. I went to all the sessions with famous authors but the only thing I can remember to this day was the impression Richard Thaler made when he presented a paper on Investment behavior, co-authored with Shlomo Benatzi. Sitting there I remember wondering “Is that Benartzi or Thaler or is his name Benatzi Thaler?”
Richard Thaler spoke a language I could understand and the topic of Investment Behavior really resonated with me. I felt that this is a topic I want to know everything about. When I came home I was on fire. I phoned up the premium pension authority and was able to retrieve data on how the entire Swedish population made investment choices for their pension. After that, I called Statistics Sweden and managed to link individual pension choice data with all their relevant demographic variables like income, wealth, education, other investments etc.
The following years were filled with exciting research and travelling the globe, presenting my findings on conferences about investment decisions and risk preferences among non-professional investors. There was hardly a topic called Behavioral Finance as it was a little bit “taboo”. Markets were supposed to be rational and so were investors, but the data showed otherwise.
The years went by and this summer, 2017 I was asked to participate in evaluating the Swedish Premium Pension system. I was especially pleased to hear that Richard Thaler was going to participate and it was exciting to meet him over lunch when he was here in Stockholm presenting his preliminary findings at the Swedish House of Finance on Sep 18, just a few weeks ago. Once again he proved to be down to earth and easy to understand.
Thank you Richard for trail blazing a very interesting path for people like me to follow.
- Posted by Anders Stenkrona
- On October 9, 2017
- 2 Comments