—Richard Thaler, the University of Chicago economist from the Booth School of Business who won the Nobel Prize on Monday, is an economist we cultural pontificates can love.
Why? Simple. His work embraces human irrationality.
Some of us get to write about that every day. Another word for human irrationality is art.
You can see it splattered all over the walls of our fine museums. It haunts Bruce Springsteen’s lyrics. It is on view in Vivian Maier’s photographs. Chance the Rapper “spits on the Apple and kills a worm.”
King Lear: pretty irrational dude, felled by misjudging the affection of his children. Lady Macbeth: not so data-driven. Hamlet: too overcome by indecision to act rationally, even to act at all. Alexander Hamilton: exceptionally rational until his son dies trying to emulate his dad, and then the pain becomes unimaginable. Tony Soprano: rational, except when staring at a fish.
Granted, the world of economics doesn’t usually frame Thaler in those terms, for they do not give out Nobel Prizes for the understanding of joy, tears or chaos, the fallout from what we saw at the age of 5 and have never been able to forget. There is not an economic mechanism for a mess. Thaler is what is formally known as a behavioral economist, a legitimately scientific person who probes the intersection of economics and human psychology and who (to quote Richard Shiller, a fellow behavioral economist) does not describe human acts as merely “mathematical optimization by separate and relentlessly selfish individuals, subject to budget constraints.”
We’re pretty selfish but not that smart. And not that impervious to pain.
Rather, Thaler’s work describes us all as subject to psychological forces — this explains why, for example, I will go to all kinds of trouble to save a nickel on a gallon of gas, but then happily overpay for my Diet Coke in the office vending machine where I suspect the pop tax will be for all time.
It’s not that other economists did not know deviants existed — the ruling assumption was just that, in aggregate, we all follow the rules. Thaler took what traditionally has been seen as abnormalities and argued for their centrality to the human condition. This will not be a surprise to you if you watch a play or a movie from time to time.
He has charted how unhinged we can become if we think we perceive unfairness in our midst: “We are not living in a time when excellence is rewarded,” a friend said to me the other night, shaking her head. Had that time not existed — in her mind at least — she would not have felt such frustration.
For Thaler (who has collaborated with the improvisers at Second City) understands that we are far more resistant to the loss of something we already own than not getting it in the first place, even though the net benefits are the same. The Republican Party has a much harder job arguing the weaknesses of Obamacare because so many see it as a benefit someone was threatening to remove. The so-called Dreamers of DACA have framed their case in the same way, and bolstered their position.
Everyone in the entertainment business knows that you’re far more likely to go to something if you already have tickets: the Lyric Opera’s Danny Newman was famously fond of noting that the fickle single-ticket buyer would never go out in a snowstorm on the same night and buy the same ticket for the same price at the box office. We don’t like to lose things, even if it costs us more money to keep them.
Yet there also is pervasive evidence that people don’t value something that has free tickets. You’re better at least charging a little. We claim to hate high prices for entertainment, but I am always struck by how much people talk about the most egregious examples, and how excited they seem to make them. Paying a lot can be a badge of honor — conspicuous consumption, an economist might say — but Thaler also allows room for mere stupidity. During that famous
Chicagoblizzard, I put my well-being at risk trying to get home from some dance performance that did not matter to me at all. Being out that night was sheer stupidity.
Where would TV be without human stupidity? It would not exist. At what and whom would we be able to laugh?
Chris Jones is a Tribune critic.
Richard Thaler of the University of Chicago wins Nobel for work in behavioral economics »
Why Nobel economist Thaler says he’s nervous about stock market »
How Richard Thaler changed my life (and everybody else’s) »
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