The Royal Swedish Academy of Sciences awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2017 to the economist Richard Thaler, University of Chicago, USA, “for his contributions to behavioural economics“, including the areas of limited rationality, social preferences, and lack of self-control.
His book Misbehaving gives a very readable introduction to his work and the field of behavioural economics more generally.
The Royal Swedish Academy of Sciences has awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2015 to Angus Deaton “for his analysis of consumption, poverty, and welfare” (press release follows).
To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices. More than anyone else, Angus Deaton has enhanced this understanding. By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics. The work for which Deaton is now being honored revolves around three central questions:
How do consumers distribute their spending among different goods? Answering this question is not only necessary for explaining and forecasting actual consumption patterns, but also crucial in evaluating how policy reforms, like changes in consumption taxes, affect the welfare of different groups. In his early work around 1980, Deaton developed the Almost Ideal Demand System – a flexible, yet simple, way of estimating how the demand for each good depends on the prices of all goods and on individual incomes. His approach and its later modifications are now standard tools, both in academia and in practical policy evaluation.
How much of society’s income is spent and how much is saved? To explain capital formation and the magnitudes of business cycles, it is necessary to understand the interplay between income and consumption over time. In a few papers around 1990, Deaton showed that the prevailing consumption theory could not explain the actual relationships if the starting point was aggregate income and consumption. Instead, one should sum up how individuals adapt their own consumption to their individual income, which fluctuates in a very different way to aggregate income. This research clearly demonstrated why the analysis of individual data is key to untangling the patterns we see in aggregate data, an approach that has since become widely adopted in modern macroeconomics.
How do we best measure and analyze welfare and poverty? In his more recent research, Deaton highlights how reliable measures of individual household consumption levels can be used to discern mechanisms behind economic development. His research has uncovered important pitfalls when comparing the extent of poverty across time and place. It has also exemplified how the clever use of household data may shed light on such issues as the relationships between income and calorie intake, and the extent of gender discrimination within the family. Deaton’s focus on household surveys has helped transform development economics from a theoretical field based on aggregate data to an empirical field based on detailed individual data.
The Vontobel Prize for Aging Research was awarded yesterday in Zurich and Renato Frey received the 2 nd prize (ex aequo) for his work on aging in decisions from experience. See below for the list of prize winners and the laudatio for Renato’s paper. Congratulations!
1. Maren Cordi and Björn Rasch for the paper on Improving sleep and cognition by hypnotic suggestion in the elderly (Neuopsychologia, 2015).
2. (ex aequo) Renato Frey for the paper The role of cognitive abilities in decisions from experience: Age differences emerge as a function of choice set size (Cognition, 215).
3. (ex aequo) Nils H. Ulrich and Jakob M. Burgstalle A prospective Swiss multicenter cohort study (Spine, 2015).
Here is the laudatio for Renato’s work:
Mit der Vergabe des Vontobel-Preises für Alter(n)sforschung an Herrn Frey würdigt die Jury eine Person, die in ihrer Arbeit in origineller Weise aufzeigt, dass es bei älteren Personen um 70 Jahre trotz einer Verringerung im Labor gemessener kognitiver Fähigkeiten in erfahrungsbasierten Entscheidungen keine Unterschiede in der Leistung zu jungen Personen um 24 Jahre geben muss, solange sich die Zahl der Entscheidungsoptionen im Umfang alltäglicher Situationen bewegt. Die Arbeit ist in ihrer experimentellen Vorgehensweise beispielhaft. Sie ist ebenfalls beispielhaft für ein zunehmend einflussreicheres Paradigma der Erforschung des gesunden Alterns, bei dem nicht nach möglichen Altersbeeinträchtigungen gesucht wird, sondern danach, unter welchen Bedingungen gerade keine Alterseffekte auftreten, also Leistungen stabilisiert werden.