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Modi government had already put Nobel winner's idea into practice

10 October 2017

On Monday, the 2017 Economic Sciences Nobel prize was awarded to Richard H. Thaler, a professor at University of Chicago, USA, for his contributions to behavioural economics by the Royal Swedish Academy of Sciences.

The Nobel committee in an official release stated that Thaler had "built a bridge between the economic and psychological analyses of individual decision-making".

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Following the announcement of his prize, Thaler said that his most important contribution to economics "was the recognition that economic agents are human and that economic models have to incorporate that". They make mistakes due to irrationality but through some nudging in the right direction, they could be helped to make better decisions.

The Nobel committee said Thaler's work shows how human traits affect individual decisions as well as market outcomes. "His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many areas of economic research and policy". Officially known as the Behavioural Insights Team, the unit was first set up in the United Kingdom in 2010 in the Prime Minister's Office to apply nudge theory to try to improve government policy and services while minimising expenditure.

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However, when Thaler was informed by a tweep that the BJP-led NDA government had made a decision to introduce Rs 2000 notes in a remonetisation effort, the Nobel laureate said, "Really?"

The 72-year-old economist, who made a cameo alongside Selena Gomez in the 2015 film "The Big Short", joked that he would spend the $1.1 million award "as irrationally as possible". Former Reserve Bank of India governor Raghuram Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. Of 79 laureates so far, more than a third have been affiliated with the university's school of economics.

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In the comedy-drama about the credit and housing bubble collapse that led to the 2008 global financial crisis, Thaler reiterates his theory that humans often act in irrational ways.

Modi government had already put Nobel winner's idea into practice