If there's one thing to know about world-renowned behavioral economist Richard Thaler, it's that he's human.
Just as important? He thinks you are too. And that's more profound than it seems.
His insertion of human psychology into the hard-core mathematical field of economics was once so heretical that Thaler couldn't even get his ideas published.
But it made sense to him.
"I'm pretty stubborn, and this was fun," he said. "Besides, I enjoy stirring the pot."
A Lincoln Park resident and professor at the University of Chicago Booth School of Business, Thaler is now revered as a founding father of the relatively new field of behavioral economics. It considers biases, lack of willpower and a host of other human frailties that lead people to make bad decisions about everything from the money they spend to the food they eat.
For his contributions, Thaler, 66, is likely in line for a Nobel Memorial Prize in Economic Sciences, some colleagues say.
"It would be a scandal if he were not short-listed," said Daniel Kahneman, a Nobel laureate and longtime friend and collaborator of Thaler. "I'm sure he is."
He's an informal adviser to President Barack Obama's administration and to his re-election campaign, and a formal adviser to the "Behavioural Insight Team" in Prime Minister David Cameron's administration in the United Kingdom.
Thaler is famous for devising easily understood scenarios that show how human behavior bucks economics and, sometimes, logic. Consider:
* Why, during a hazardous snowstorm, would we skip driving to a concert if the tickets were free, but risk life and limb to go if we had paid for the tickets? The risk on the roads is the same, and we don't get the money back either way. This illustrates the "sunk cost fallacy."
* Experiments repeatedly show that people will pay $3 to buy a coffee mug but demand $6 to sell a mug they have been given. The phenomenon is called the "endowment effect," where we assign greater value to things we possess.
* You bring $200 to a casino to gamble. You win another $200. If you separate the money and lose only the winnings, you may not feel much pain because you consider that money to be the casino's anyway. Yet you still lost $200. This is a good example of "mental accounting."
The wide-ranging implications of such behavior stretch to decisions made daily by consumers, marketers, companies and governments. In recent years, Thaler has turned to weightier issues of public policy.
He explains how governments can use behavioral economics to "nudge" citizens into making better choices for themselves. His ideas and those of Cass Sunstein, now Obama's regulation czar, are outlined in his best-selling book, "Nudge: Improving Decisions about Health, Wealth and Happiness." This led Thaler, along with Sunstein, to be named a finalist for Time Magazine's most influential people in the world in 2009.
"During most of the 1980s he was dismissed as a crank," said David Laibson, economics professor at Harvard University. "It takes a lot of courage to get a decade of rejection and to stick to your guns. Dick kept fighting, and eventually almost everyone came around to his view."
Not by the numbers
Thaler was born and raised in northern New Jersey with two younger brothers. His mother was a school teacher turned stay-at-home-mom. His father rode the train daily to Newark, where he was an actuary at Prudential.
Richard Thaler, Keller Professor of Economics and Behavioral Science, Booth School of Business