Richard H. Thaler, a professor at the University of Chicago’s business school, won the 2017 Nobel Memorial Prize in Economics for “his contributions to behavioral economics.” Since 1976, when Mr. Thaler and I were both assistant professors at the University of Rochester, he has challenged the standard economic assumption that people behave rationally. He has done it systematically, detailing how cognitive biases predictably lead consumers to poor decisions. Mr. Thaler has used his insights to propose ways to help people save—and save more—for retirement.
Economists often assume that it is always better to have more choices. But if that were the case, Mr. Thaler reasoned, no partygoer would be happy if the host removed a bowl of cashews. Yet those of us who know we are powerless around cashews are often glad to be relieved of the temptation to eat them. Mr. Thaler argued that reducing choice in such a case could offset a lack of self-control, leading to better outcomes.
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