According to the Nobel prize jury in the Swedish capital Stockholm, 72-year-old Thaler has made economics more human by demonstrating that individual financial choices and market outcomes are systematically affected by "limited rationality", social preferences and lack of self-control.
Thaler, of the University of Chicago Booth School of Business, is also the coauthor of the nudge theory which analyses how people make bad or irrational decisions.
More importantly, it also "nudges" them to do more long-term planning, such as saving for a pension, to serve their long-term interests.
So popular was the appeal of Thaler's theory that he was called upon to advise several governments, including that of France, and it led to the setting up of a nudge unit in 2010 under the UK's former prime minister David Cameron.
The aim was to come up with innovative ways of changing people's behaviour to help them be healthier and happier.
Fame of another sort came Thaler's way when he made a cameo appearance alongside Christian Bale and Ryan Gosling in the Hollywood film The Big Short about the 2007/2008 world financial crisis.
The prize is worth some 950,000 euros