Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I rise today to congratulate Richard Thaler, of the Chicago School of Economics, for being awarded this year's Nobel Prize for his contribution to the relatively new field of behavioural economics. It would be somewhat negligent to not mention Gary Becker, also a professor of the Chicago School, who first started extending microeconomic analysis to all human behaviour, including such arcane topics as why someone gets married or why someone commits crime. I hasten to add that Professor Becker found no correlation between these two; it's just that they were the fields of study that he decided to undertake.

While this field of economics can sometime seem a little removed from everyday life, its applications are critical to government policymaking—because, above all else, we are surprisingly perverse creatures, making highly irrational and often damaging decisions. Not that this was Becker's conclusion of his analysis of why people get married; quite the contrary. Becker concluded that people got married for distinctly rational reasons—well, mostly.

As an example, recently, as a member of the Joint Committee on Corporations and Financial Services, ASIC concluded that the consumer reforms of the 1990s, undertaken through the CLERP initiative, were in fact a failure, because, by forcing financial providers to produce thick product disclosure statements, with glossy photographs, we the parliament inadvertently sent a signal to consumers that financial products that were not suitable probably were. Consumers concluded, 'Look at how thick the material is. The quality of the paper is so good, it must be a good financial product.' Sometimes those products were not.

Richard Thaler and the behavioural science concepts that he introduced into economics have their foundation in the work Becker did, but they are more practical in their applications and they are almost certainly the most critical thing that has happened to policymakers and parliaments in the last half century. The insight that people use heuristics to make complex decisions is critical to the work that we do in this parliament—that, often by making things more complex, we hurt the very people we are trying to protect; that regulations and laws often meant to help consumers, end up doing the opposite. Finally, but most importantly, Richard Thaler brought to our attention how small nudges, like where the salad is at a school canteen, can drastically improve nutrition, or how and where organ donation options are presented have made immense changes to how many people opt to donate.

Congratulations to Richard Thaler. I hope that all of us here pay a little bit more attention to the economic prize this year than we normally would.