Daniel Kahneman, a Professor of Public Affairs at Princeton University in the US, has won this year's shared Nobel economics prize for a market research technique that shows how psychology affects people' buying decisions.
In its announcement, the Royal Swedish Academy of Sciences cited Kahneman 'for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.' Kahneman's work, it said, has laid the foundation for a new field of research by discovering how human judgment may take shortcuts that systematically depart from basic principles of probability.
According to Kahneman, 'The Nobel award in economic sciences is given in recognition of ideas that have been influential in some field of economics. In this case, the award reflects the remarkable success of an approach known as behavioral economics, which is pushing the frontiers of research by introducing psychologically realistic models of economic agents into economic theory.'
Kahneman has 'challenged the microfoundations of economics,' said Deborah Prentice, chair of Princeton's psychology department. 'He has documented the shortcuts people take and the biases they have in making decisions. When people don't have a systematic way of making a decision, they do what they can, and that was news to psychologists and economists. Before Kahneman's work was published, economists had assumed humans were motivated by self-interest and made rational decisions. In addition, economics had been considered a non-experimental science that relied on real-world observations. If people are not always capable of making rational decisions, then a lot of what economists had inferred on the basis of those assumptions really needed to be re-examined. Nowadays there's a growing body of research called experimental economics that is testing economic assumptions in the laboratory, largely because of Danny's work.'