The Nobel Prize in Economics awarded Oct. 8 to professor Richard H. Thaler for his behavioral economics work on irrational financial decisions confirms the Money Anxiety Theory and its application in banking.

Research in behavioral economics shows that money anxiety is a major factor impacting financial decision-making. The 2013 book, “Money Anxiety,” which I wrote, demonstrates how money anxiety shapes our financial decision making. For example, when money anxiety is elevated during recessions, people tend to shift money from higher yielding bank accounts to much lower yielding bank accounts just to feel that their money is more readily available. This is a phenomenon known as “mattress money.” [Continue]