Richard Thaler has been awarded the Nobel Prize for Economics for his work on incorporating insights from psychology into economic theory and policymaking.

The award, which is officially known as the Sveriges Riksbank Prize in memory of Alfred Nobel, was awarded to Prof Thaler for his “contribution to behavioural economics”, the prize committee said.

The US economist is currently professor of behavioural science and economics at the University of Chicago. He is the 79th recipient of the Nobel, which was announced by the Royal Swedish Academy of Sciences in Stockholm today. He will receive a prize of 9m Swedish krona ($1.1m).

Economists have traditionally assumed that individuals behave rationally, making decisions on the basis of all information that is readily available to them and not making decisions that they regret in hindsight.

Prof Thaler’s work has focused on incorporating insights from psychology to help explain why in practice individuals behave in ways that are not fully rational — for example, struggling to save for retirement and placing a higher value on items or money they already have than on those they might buy or win.

After the prize was announced, Prof Thaler, who is a keen golfer, said he would try to spend the money “as irrationally as possible”.

The insights from his work were summarised in the global bestseller Nudge, which was co-authored with Cass Sunstein, a professor at Harvard. Prof Sunstein quipped on Twitter that the decision to award the prize to Prof Thaler was “an unboundedly rational choice for the Nobel”.

The prize committee said Prof Thaler’s work had inspired many other researchers and transformed the field of behavioural economics, which his work spawned, from being “a fringe and controversial” field to a “mainstream area”.

Prof Thaler’s work has shown how nudging people can help them exercise greater self-control. These conclusions have been influential in shaping economic policies in recent years.

He served as an adviser to the behavioural insights team, which advised the UK government on incorporating ideas from behavioural economics into policy design. He has also advised the Swedish government on improving the design of their pension system.

Prof Thaler made cameo appearance in the 2015 film The Big Short, in which he appeared alongside Selena Gomez to explain how synthetic collateralised debt obligations proliferated in the run-up to the financial crisis.

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