Will a better understanding of behavior improve economic models?
No longer a fledgling challenge to traditional theories, behavioral economics is a growing field of study incorporating how human psychology affects economic decisions. Economists have long held that humans are perfectly rational actors who know how to maximize their own happiness. Supporters of behavioral economics say this is simplistic, and that humans are anything but rational. They argue that a greater understanding of human motivations and incentives can improve economic models and spur better policy in government and business. Behavioral economics, they say, can influence everything from what people eat for lunch to how much they save for retirement to how companies engage with their customers. But critics respond that behaviorial economics has limitations and that efforts to influence behavior, sometimes known as nudges, aren’t as powerful as the field’s cheerleaders hope. Among the questions under debate: Will behavioral economics replace traditional economics? Should business or government “nudge” people toward certain behaviors? Can behavioral economics make managers and firms more effective?
Akerlof, George A., and Robert J. Shiller, “Phishing for Phools: The Economics of Manipulation and Deception,” Princeton University Press, 2015. Two prominent economists argue that economics has failed to incorporate how deception and trickery influence markets.
Kahneman, Daniel, “Thinking, Fast and Slow,” Farrar, Straus and Giroux, 2011. This book sums up much of the groundbreaking work by psychologist Kahneman and his research partner Amos Tversky on judgment and decision-making, including applications for economics.
Mullainathan, Sendhil, and Eldar Shafir, “Scarcity: Why Having Too Little Means So Much,” Picador, 2013. A look at the behavioral economics of poverty and development by two researchers at Harvard and Princeton, respectively.
Nease, Bob, “The Power of Fifty Bits: The New Science of Turning Good Intentions Into Positive Results,” HarperCollins, 2016. The former chief scientist at Express Scripts, a pharmacy benefits manager, explains how corporations and others in the business world can apply behavioral strategies to business.
Thaler, Richard H., “Misbehaving: The Making of Behavioral Economics,” W.W. Norton & Co., 2015. One of the first behavioral economists traces the history of the field and his contributions to it.
Thaler, Richard H., and Cass R. Sunstein, “Nudge: Improving Decisions About Health, Wealth, and Happiness,” Penguin Books, 2008. A classic in the literature, this book argues that policymakers and business leaders should use “choice architecture” to better design everything from cafeteria lines to retirement savings plans to help consumers make better decisions.
Ariely, Dan, “The End of Rational Economics,” Harvard Business Review, July–August 2009, http://tinyurl.com/
Berman, Kristen, “How Startups Should Use Behavioral Economics,” Tech Crunch, Dec. 7, 2015, http://tinyurl.com/
Harford, Tim, “Behavioural Economics and Public Policy,” Financial Times, March 21, 2014, http://tinyurl.com/
Lambert, Craig, “The Marketplace of Perceptions,” Harvard Magazine, March–April 2006, http://tinyurl.com/
Lowenstein, George, and Peter Ubel, “Economics Behaving Badly,” The New York Times, July 15, 2010, http://tinyurl.com/
Porter, Eduardo, “Nudges Aren’t Enough for Problems Like Retirement Savings,” The New York Times, Feb. 23, 2016, http://tinyurl.com/
Thaler, Richard H., and Sendhil Mullainathan, “How Behavioral Economics Differs from Traditional Economics,” The Concise Encyclopedia of Economics, http://tinyurl.com/
Reports and Studies
“2015 Annual Report,” White House Social and Behavioral Sciences Team, http://tinyurl.com/
Beshears, John, Patrick Rooney and Jenny Sanford, “Express Scripts: Promoting Prescription Drug Home Delivery (A) and (B),” Harvard Business School Case 916-026, February 2016, http://tinyurl.com/
Samson, Alain, ed., “The Behavioral Economics Guide 2015,” http://tinyurl.com/
The Next Step
Dholakia, Utpal M., “Why Nudging Your Customers Can Backfire,” Harvard Business Review, April 15, 2016, http://tinyurl.com/
Ember, Sydney, “Life Insurance Tries to Lighten Up,” The New York Times, March 25, 2016, http://tinyurl.com/
Whitman, Elizabeth, “The ‘Natural’ Food Label Is A Lie, And Most Customers Have No Idea,” International Business Times, Jan. 27, 2016, http://tinyurl.com/
Belsky, Gary, “Why We Think We’re Better Investors Than We Are,” The New York Times, March 25, 2016, http://tinyurl.com/
Singal, Jesse, “Don’t Let Your Brain Throw Away All of Your Money,” New York Magazine, Jan. 27, 2016, http://tinyurl.com/
Wang, Penelope, “How a Bowl of Cashews Changed the Way You Save for Retirement,” Time, May 11, 2015, http://tinyurl.com/
Bunch, Joey, “Democrats offer bill to grant options on state tax refunds,” The Denver Post, April 18, 2016, http://tinyurl.com/
Nussbaum, Dave, “The science of human behavior is reshaping the US government,” Quartz, Nov. 10, 2015, http://tinyurl.com/
Rutter, Tamsin, “The rise of nudge – the unit helping politicians to fathom human behavior,” The Guardian, July 23, 2015, http://tinyurl.com/
Nolan, Hamilton, “Behavioral Science and Poverty,” Gawker, June 1, 2015, http://tinyurl.com/
Semuels, Alana, “When the Government Tells Poor People How to Live,” The Atlantic, Dec. 14, 2015, http://tinyurl.com/
Zweig, Jason, “The Anti-Poverty Experiment,” The Wall Street Journal, June 5, 2015, http://tinyurl.com/
American Economic Association
2014 Broadway, # 305, Nashville, TN 37203
Academic society for U.S.-based economists that publishes several top scholarly journals.
The Behavioural Insights Team
33 Greycoat St., Westminster, London, SW1P 2QF, UK
The U.K.’s behavioral economics unit that inspired the White House’s effort.
Center for Advanced Hindsight
2024 W. Main St., Durham, NC 27705
Economist Dan Ariely’s research lab at Duke University that studies behavioral economics.
Economic Science Association
School of Information, University of Michigan, 105 S. State St., Ann Arbor, MI 48109
Professional association for experimental economists.
European Association for Decision Making
Leeds University Business School, Maurice Keyworth Building, University of Leeds, Leeds, LS2 9JT, UK
44 (0)113 343 4473
Association for researchers who study decision-making and judgment.
International Association for Research in Economic Psychology
Servicebox 422, N-4604, Kristiansand, Norway
47 38 14 15 12
Scholarly group for researchers that focuses on the intersection of economics and psychology.
Society for the Advancement of Behavioral Economics
PO Box 8130, 6700 EW Wageningen, The Netherlands
Behavioral economics association for researchers.