10.4079/pp.v22i0.15114 Mastria

How a Smiley Face Can Save the World The Invisible Gorilla: How Our Intuitions Deceive Us Christopher Chabris and Dan Simons (Harmony, 320 pp., $15.00) Nudge: Improving Decisions about Health, Wealth, and Happiness Richard H. Thaler and Cass R. Sunstein (Penguin Books, 320 pp., $17.00) Predictably Irrational: The Hidden Forces That Shape Our Decisions Dan Ariely (Harper Perennial, 384 pp., $15.99) Simpler: The Future of Government Cass R. Sunstein (Simon & Schuster, 272 pp., $16.00) The Upside of Irrationality: The Unexpected Benefits of Defying Logic Dan Ariely (Harper Perennial, 368 pp., $15.99) The Victory Lab: The Secret Science of Winning Campaigns Sasha Issenberg (Broadway Books, 400 pp., $15.00) By Tony Mastria

In 2005, the unsuspecting resi- decision-making, an exercise in IRB- dents of 300 households in San Mar- sanctioned manipulation that only cos, California, agreed to take part in a jaded social scientist could devise. what they thought was an experiment Needless to say, the results would in energy use. Little did these well- reveal more about human nature than meaning rubes realize that the true they would about conservation. purpose of the study was to test the The 300-household sample effects of social acceptance on basic was divided in two. For four weeks, 95 Policy Perspectives | Volume 22 half the participants received regular policymakers are grasping for easy updates on their personal electricity solutions to ongoing problems (like consumption, including a comparison reducing carbon emissions with with the group average. The results energy-conscious emoticons), the op- were intriguing but unsurprising: portunity for audacity has never been residents whose consumption was riper. The above vignette is just one above the median reduced their use example of how psychology can drive the next time around, while residents such policy innovation, from the whose consumption was below the book Nudge: Improving Decisions about median increased their use—both eco- Health, Wealth, and Happiness by Rich- nomically rational responses known ard Thaler and Cass Sunstein. And as boomerang effects. Participants on Nudge is just one in a series of titles either side of the average reacted just elucidating how the ascending field of as we might expect: above-average behavioral economics (the odd-couple users (sweating under the hot, glaring marriage of psychology and econom- light of peer pressure and incandes- ics) can impact our public policy. cent bulbs) felt compelled to conserve, Not only does behavioral while below-average users (seeing economics offer new insights for the they were below the socially accept- world of policymaking; it erodes old able level of energy use) decided they assumptions and razes old ways. It could afford to consume more with highlights the limits of traditional no consequence. (neoclassical) economics, both inside The other half of participants and outside the public sphere, and fared a bit differently. They were giv- illuminates new paths for policymak- en the same information as the first ers and private citizens alike. group, plus a small social cue: resi- For instance, behavioral dents with above-average energy use economics explains why losses are received a frowny face L with their more painful than gains are enjoyable, results, while residents with below- a phenomenon known as prospect average energy use received a smi- theory. Since traditional economics ley face J. The result? Not only did teaches us that rational human beings consumption of above-average users treat gains and losses equally, this descend toward the average (as it revelation to the contrary is both sur- did in the first group), but consump- prising and significant. For example, tion of below-average users did not in another anecdote on energy use, change at all (statistically speaking); researchers found that participants they maintained their lower levels of were more willing to reduce their electricity use. The boomerang effect electricity consumption if the finan- had been essentially neutralized. In cial consequences were framed as San Marcos, California, it seems the losses averted (“If you don’t upgrade basic rules of human rationality— your appliances, you will lose $100 undergirded by hundreds of years in energy costs”) rather than money of systematic, empirical research in gained (“If you do upgrade your ap- economics and the nuances of objec- pliances, you will save $100 in energy tive, higher-order reasoning—are no costs”). In this case, the potential loss- match for a circle, two dots, and an es acted as a more powerful incentive arc arranged to resemble an approv- than the potential gains, even though ing, happy face. both outcomes meant the same thing. See? J Needless to say, this altered under- At a time when gridlocked standing of human rationality has the 96 10.4079/pp.v22i0.15114 Mastria potential to retool our discussions of the pieces where traditional econom- economic concerns. ics falls apart. Thaler and Sunstein further Nudge builds on the work the case for behavioral economics of a nascent and growing field, and by noting the power of choice archi- savvy policymakers would do well to tecture, the notion that people often explore this new frontier of economic make decisions based upon how their insight. A good place to start would options are presented. For example, be the work of Duke University pro- students who eat school lunches are fessor Dan Ariely, who has published more likely to select healthier meals several books that serve as thorough if fruits, veggies, and other nutritious but intelligible primers for the field, items are placed at the front of the including Predictably Irrational: The lunch line. Unfortunately, the con- Hidden Forces That Shape Our Decisions verse is also true: students are more and The Upside of Irrationality: The Un- likely to eat poorly if they encounter expected Benefits of Defying Logic. Ari- unhealthy items first. As the authors ely synthesizes the research in a way note, this runs counter to traditional that’s easily digestible to readers of all economics, which asserts that people experience levels, combining theoreti- make decisions purely on the merits cal ideals with real-world examples. of the options they face – not on how For instance, Ariely shows those options are displayed. Given that when people are faced with a that childhood obesity is one of our set of choices, their final decision most prominent public health con- is affected by every option on the cerns today, it’s not hard to see the list, even the ones they would never potential for such a small change to consider selecting in the first place. yield big results. Ariely describes how he presented Thaler and Sunstein leave one group of students with a real no stone unturned in the search for advertisement from The Economist a more sensible understanding of offering three subscription options: human behavior, spotlighting such a web-only option for $59 per year; a economically inexplicable phenomena print-only option for $125; and a print as anchoring (assigning a numeri- & web combo option for $125. When cal value to something based on an asked which subscription option they unrelated number somewhere else— would prefer, students overwhelm- like basing willingness to pay for a ingly selected the combo option, bottle of wine on the last two digits of while a smaller number selected the one’s Social Security number); avail- web-only option and nobody selected ability bias (judging the likelihood of the print-only option. He then pre- an event by its frequency or salience sented the same advertisement to in one’s personal life—like overesti- a second group of students, minus mating the possibility of shark at- the print-only option. Because no tacks, crime, and lightning strikes); students in the first treatment se- and representativeness (attempting lected the print-only option anyway, to determine if a phenomenon fits an it seemed reasonable to predict that explainable pattern or is simply the its absence would have little effect result of chance—like geographical on this second trial. On the contrary: pockets of concentrated illness or “hot when presented with just a $59 web- hands” in basketball). only option and a $125 combo option, Put simply: behavioral eco- most students chose the (cheaper) nomics allows psychology to pick up web-only option. While this variation 97 Policy Perspectives | Volume 22 seems illogical from a traditional eco- more people to vote. For example, nomic perspective, it makes perfect Issenberg describes an experiment sense in the psychology-driven world conducted during the state of Michi- of behavioral economics. In the first gan’s 2006 primary election in which trial, students’ least-preferred option 100,000 randomly chosen residents ($125 print-only) served as an anchor received one of five mailers remind- to evaluate another equal-cost option ing them to vote. The first letter em- ($125 combo), which seemed like a phasized “civic duty,” a conventional bargain by comparison. Without the theme in get-out-the-vote efforts, and presence of that anchor in the second the second letter informed recipients trial, students felt less compelled to that their voting behavior was be- snag the seemingly better deal. It’s a ing studied, since simple awareness lesson sensible policymakers would of being observed might affect their benefit from learning: good gover- willingness to vote (a phenomenon nance comes not only from making known as the Hawthorne effect). the right choices, but from presenting While the first two mailers appealed the right choices to others as well. to voters’ individual behavior, the In Simpler: The Future of Gov- other two overtly targeted their social ernment, Cass Sunstein (director of the norms and peer pressure. The third Office of Information and Regulatory letter included a chart highlighting Affairs from 2009 to 2012) builds on the vote history of every voter in the his work in Nudge to provide even recipient’s household (a checklist of more examples of behavioral econom- the recent elections in which they had ics in action. For instance, he dis- and hadn’t voted), while the fourth cusses how small fees on grocery bags letter included the same chart and demonstrate that loss aversion affects compared it to the vote history of the even trivial consumer decisions (a recipient’s neighbors. (The fifth let- phenomenon DC residents know all ter was an impartial control mailer.) too well); he highlights the efforts of While this fourth letter elicited vocif- savvy British tax collectors who show erous complaints from angry recipi- that appealing to social norms can ents, it also elicited their votes, gen- dramatically improve compliance (by erating a turnout advantage of eight reminding taxpayers, for example, percentage points over the control let- that “9 out of 10 people in Exeter ter (37.8 percent to 29.7 percent) and pay their taxes on time”); and he similarly impressive margins versus cites the Federal Trade Commission’s the “civic duty” and Hawthorne treat- EnergyGuide label, which includes an ments (31.5 percent and 32.2 percent, appliance’s “estimated yearly operat- respectively). ing cost,” as an example of “unhiding While these examples demon- costs” from otherwise unwary con- strate behavioral economics’ incred- sumers. ible potential as a policy tool, the field We can even look beyond is not without controversy. In making policy decisions to the realm of civic their case for greater use of behav- engagement, where behavioral eco- ioral economics, Thaler, Sunstein, nomics can encourage us to be better and other proponents often espouse citizens. Sasha Issenberg’s The Victory the philosophy of libertarian pater- Lab: The Secret Science of Winning Cam- nalism, wherein people are given a paigns describes how election officials, choice, and decision-makers set the candidates, campaigns, and parties default option to whatever they see can use social norms to encourage as the best choice for most partici- 98 10.4079/pp.v22i0.15114 Mastria pants, without restricting the ability the nature of consent. Thaler and Sun- to choose otherwise. For example, an stein argue that consent is presumed employer with a companywide sav- in opt-out systems, but it’s unlikely ings plan might automatically enroll that every participant will be wary employees in a 401k, but preserve of her involvement in the program. the ability to opt out at any time. In that case, policymakers must ask This decision may sound innocuous, themselves what level of ignorance, and perhaps even reasonable, but it if any, is acceptable when it comes to highlights an issue that behavioral such an invasive medical procedure. economics occasionally fails to ad- In response, Thaler and Sunstein of- dress: people don’t always under- fer an alternative “mandated choice” stand the choices they’re making (or model of enrollment, wherein citizens not making). Automatic enrollment in must make a selection (enroll or don’t a savings plan can assist people with enroll) in order to submit their appli- limited financial literacy by helping cation; there is no default option. The them build a nest egg and cultivate logic here is that by making an active responsible monetary habits. But it choice, participants will understand can also hurt people with limited fi- what they’re agreeing (or disagreeing) nancial literacy if they don’t know it’s to, while potentially increasing dona- taking place. For someone living pay- tion rates overall. check-to-paycheck, in debt or close to Thus, despite its utility as a it, every dollar counts toward main- tool in the policymaker’s arsenal, it taining a decent quality of life. And would be misguided to view behav- if an employee is not familiar with, ioral economics as a cure-all for soci- or doesn’t fully comprehend, her ety’s ills. Having had a clear influence company’s savings policy, she may be in just a few areas so far, its potential jeopardizing her fiscal wellbeing by remains largely unexplored, and it withholding a significant portion of will take years of trial, error, and in- her salary every week. As valuable as novation for policymakers to deter- that money may be later on, it can be mine where it can help and where it equally crucial in the moment. cannot (or should not). Thaler and The quandaries surround- Sunstein acknowledge as much by ing libertarian paternalism can be citing some of the primary rebut- even more vexing on issues of pub- tals to libertarian paternalism. These lic health. For example, Thaler and include the slippery slope argument Sunstein note the disparities in organ (the potential for nudges to evolve donation rates between countries into mandates and prohibitions), the with opt-in, opt-out, and active choice possibility that “evil nudgers and bad models of enrollment. Countries nudges” could manipulate people where citizens who apply for a driv- maliciously, the principle that govern- ers’ license are automatically enrolled ment policies ought to strive for neu- in organ donation programs (with trality (which libertarian paternalism the ability to opt out) observe much intentionally upends), and the reality higher rates of organ donation than that free people have a “right to be countries (like the US) where citizens wrong” (even in cases where their are not automatically enrolled but decisions may be disadvantageous or have the ability to opt in. While this even harmful to themselves). finding can be encouraging to poli- Sunstein furthers this discus- cymakers, it can also raise troubling sion in Simpler. In addition to the questions about personal privacy and concerns outlined above, he says, lib- 99 Policy Perspectives | Volume 22 ertarian paternalism strikes many as a (that our minds store information hindrance to the free market itself, to with total clarity and accuracy) the extent that it mandates or pre- explains how eyewitness testimony empts certain behavior by businesses fueled by false memories can punish and their customers (like requiring innocent people for crimes they did products to carry a specific label or not commit. In total, Chabris and Si- preventing consumers from buying mons unearth six illusions of human items that fail to meet a particular perception (including knowledge, regulatory standard). While Thaler confidence, cause, and potential), and Sunstein attempt to explain away all of which have clear implications these concerns – characterizing many for public policy. So as we recognize of them as either overblown or over- how far we are from being purely simplified – it’s clear that they will rational decision-makers and begin to continue to percolate so long as be- embrace a more psychology-centered havioral economics remains a promi- style of policymaking, it’s crucial that nent player in policy debates. we concede not only the faults in our Finally, in considering the role theories but also the flaws within that behavioral economics can occupy ourselves. in our policy discussions, it’s worth Limitations notwithstanding, asking how well we truly understand it’s clear that behavioral economics human psychology at all. That is, if has a role to play in our policy de- behavioral economics exposes the bates and will only grow in impor- limitations of the “economic” side tance as our societal concerns become of the equation, what does it say larger and more complex. Thus, it’s about the “behavioral” side? In truth, up to policymakers to broaden their perhaps not much. In The Invisible analyses beyond conventional eco- Gorilla: How Our Intuitions Deceive Us, nomic considerations and begin to Christopher Chabris and Daniel Si- integrate these basic principles of hu- mons reveal that many of our natural man psychology into their decisions. responses to everyday situations stem And as our country’s rising class of from “illusions” in how we perceive leaders and lawmakers, it’s contin- the world around us. For example, gent upon us to realize the benefits of the “illusion of attention” (that we this slow, quiet revolution in political are adept at discerning the details of understanding. It may be a bit of an our surroundings) explains why one overstatement to suggest that behav- can watch a video about basketball ioral economics can save the world, while failing to notice a gorilla walk- but surely it’s worth at least one of ing through the middle of the screen. these. J Meanwhile, the “illusion of memory”

Tony Mastria is in his second and final year at the Trachtenberg School and is excited to earn his Master of Public Administration in May 2015. He currently works as a Digital Media Associate for the Justice Policy Institute, where he spends the majority of his day on Facebook and Twitter. Before coming to DC, Tony graduated from the University of California, Los Angeles, with a Bache- lor of Arts in Political Science and minors in Public Affairs, Civic Engagement, and Environmental Systems and Society. He looks forward to the day he can return to California and forever banish the concept of “winter” from his life. In 100 10.4079/pp.v22i0.15114 Mastria his free time, he likes to eat ice cream and really enjoys a nice pair of slacks.

Tony would like to present a smiley face J to all the people who played a role in helping this article come to fruition. First, he offers his utmost thanks to his editors Christine Mellen and Mathew Vicknair, without whose guidance and gentle nudges this article likely would have been completed the night before— and not nearly as refined and professional as it came to be. In addition, he would like to extend his gratitude to the Sunnyvale Public Library for giving him the means and inspiration to begin exploring this subject, without asking anything in return but his library card and frequent late fees. If this article is ever deemed worthy enough to grace its shelves, Tony will no doubt express his appreciation through a generous contribution. Finally, Tony would like to thank his family, whose love, support, and unsolicited care packages gave him the tools he would need to see this project through to the end. (In return, you can now brag to friends and relatives about him being a “published author.”)

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