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Alberto Andreu Pinillos, PhD in Economics and Adjunct Professor of the School of Economics.

Nobel Economics 2017: What does Economics have to do with Psychology?

Wed, 11 Oct 2017 15:01:00 +0000 Published in Diario de Navarra 10/10/2017

To answer the question with which I title this article, two theories can be used. The first is the traditional one: Economics and Psychology have little (or nothing) in common, because they are two opposing disciplines; (let us not forget that even today we continue teaching -and learning- with the traditional division between sciences and letters, between people and numbers... and that is how we have fared).

However, Richard H. Thaler, professor at the Booth School of Business, University of Chicago, has given us another answer: Economics and Psychology are intimately related. And, for establishing that connection, he has been awarded the 2017 award Nobel Prize for Economics . Thaler has been the first to break the (until now) false assumption that the economic decisions we make are driven exclusively by rational, depersonalized and selfish criteria, which seek economic performance as the only goal.Thaler has broken the classical economic theory that, historically, thought that irrational behavior is irrelevant in the Economics.

Thaler, in one of his fundamental works, Todo lo que he aprendido con la psicología económica (Deusto), opens our eyes and tells us that the unpredictable, random and emotional factor that we human beings have is also relevant to understanding how people make our economic decisions.You only have to go out into the street (or look at yourself in the mirror) to understand that people, for better or worse, do not always decide according to rational criteria, but that, on many occasions, we are driven by impulses, by "desires, values, fears, prejudices or affections". This is Professor Thaler's field of study, a field that has come to be known as Economic Psychology.

Professor Thaler's research already has many practical applications. But now, in times of Artificial Intelligence and Big Data, allow me to ask a question: what investor would not like to have an algorithm that synthesizes the profile of people like Bill Gates, Steve Jobs or Elon Musk and apply it to those new entrepreneurs who turn to them in search of funding to launch "those impossible projects in which nobody, in their right mind, would invest a euro? Imagine now the potential of Thaler's work and of Economic Psychology.