WASHINGTON – Richard Thaler of the University of Chicago Booth School of Business was awarded the Nobel prize for economics Monday for his work explaining how human behavior often doesn't fit rational economic models. Outside his profession, Thaler is probably best known for appearing alongside pop star Selena Gomez in the movie "The Big Short," explaining how human mistakes contributed to the financial crisis.
On Monday, Thaler spoke by phone with The Associated Press. Below are some highlights of the interview.
On how people react to "unfair" prices:
"It can work either way. You know, people might be unwilling to buy something that they would really value just because they think that the price is higher than it usually is. You know, there are a couple Cubs' games in town this week that are selling for higher prices than usual, and if people think that's unfair, maybe they won't go, even though they would enjoy it. The flip side of it is that firms that violate these norms of fairness can make customers angry. And I think Uber has learned this lesson or is in the process of learning it."
How a behavioral economist might interpret the 2016 presidential election result:
"I think behavioral economists don't have any more of an explanation about the rise of Trump than anyone else."
On economic policy:
"I try to teach people to make fewer mistakes. But in designing economic policies, we need to take full account of the fact that people are busy, they're absent minded, they're lazy and that we should try to make things as easy for them as possible."
Investing advice for the average person:
"Well, I think the biggest mistake people make in most domains is overconfidence. If you're trading individual securities, you're almost certainly making a mistake. Because most professional managers can't outperform their benchmarks, and there's little reason to think that individuals can."
"Don't get trapped by looking at what the price was that you paid for some stock originally. I always tell people, 'If you wouldn't buy the stock now, you should sell it.' ... Especially if a stock has gone down, people are reluctant to sell it because they don't want to admit they made a mistake."
How financial crises have affected his field of study:
"Each crisis has been good for behavioral economics. Starting with the October crash in 1987, the tech bubble, the real estate bubble, the financial crisis. It even led to the start and end of my movie career."
On whether he's willing to pay inflated prices for a seat at a Cubs playoff game:
"Let's just say that I have a ticket to tomorrow's game at a very reasonable price."