Congratulations to Dick Thaler on Winning the Nobel Prize!
Someone from at the World Bank wrote to ask what I thought about the Nobel Prize for Dick Thaler. Here’s my reply:
I think it’s terrific that Dick got the prize. He deserves lots of credit for pushing forward the research agenda of behavior economics, and doing so with good cheer, despite the disdain it provoked from many quarters.
He lead the wave of work that followed the pioneering basic scientific insights of Danny Kahneman, Amos Tversky and their many colleagues from psychology. Economists working as part of this second wave told those insights that it was time to grow up, get out of the house, and get a job. They put behavioral economics to work and turned it into “useful knowledge.”
I understand the purely aesthetic appeal of a convincing scientific explanation. To borrow from the title for one of Richard Feynman’s books, there is a “pleasure in finding things out.” The problem is that people can derive aesthetic pleasure from many different types of “explanation.” After all, the problem with the traditional choice model based on conscious utility maximization is not that it is ugly. And, on grounds of mathematical beauty, no economic model can touch a theory of perfect competition grounded in convex duality. The real problem is that these models are show horses, not work horses. As far as I can tell, the only way to decide when and how to add some messy detail to a scientific explanation is also the way to distinguish the work of scientists from our work of scientologists and their ilk. Scientists are the ones who remain committed to useful knowledge as the only final output that matters. In the context of another example, research trials alone will never win the battle between scientists and the anti-vaxers. The decisive win is the massive reduction in mortality and morbidity that vaccines caused.
To be sure, we have to leave room for early work on knowledge that looks to be potentially useful. But ultimately, scientific knowledge has to do real work. This why Dick’s contributions are so important.