The Behavioral Economics Guide 2017

The Behavioral Economics Guide 2017

ISSN 2398-2020 THE BEHAVIORAL ECONOMICS GUIDE 2017 Edited by Alain Samson Introduction by behavioraleconomics.com CassEdited Sunstein by The Behavioral Economics Guide 2017 ISSN 2398-2020 Author information: Alain Samson (Editor) Cass Sunstein (Introduction) Liz Barker, Ian Bright, Jorge Dryjanski Lerner, Charlotte Duke, Gerhard Fehr, Mariana Garza Arias, Tim Gohmann, Christian Goy, Jim Guszcza, Crawford Hollingworth, Moritz Jäger, Alexander Joshi, Alain Kamm, Ronald S. Mundy, Timothy Murphy, Ed Nottingham, Nathalie Spencer, Henry Stott (Contributing authors) Cover and logo designs by number168, Maiol Baraut and Alain Samson. Published on www.behavioraleconomics.com by Behavioral Science Solutions Ltd Copyright © by the authors All rights reserved Requests for permission to reproduce materials from this work should be sent to [email protected] or directly to contributing authors. Suggested citation: Samson, A. (Ed.)(2017). The Behavioral Economics Guide 2017 (with an introduction by Cass Sunstein). Retrieved from http://www.behavioraleconomics.com. Suggested citation for individual sections/authors: [Author(s)] (2017). [Chapter/Section Title]. In A. Samson (Ed.), The Behavioral Economics Guide 2017 (with an introduction by Cass Sunstein)(pp. [nn]-[nn]). Retrieved from http://www.behavioraleconomics.com. With Contributions By: With Further Support By: Table of Contents I N T R O D U C T I O N “DON’T TELL ME WHAT I CAN’T DO!”: ON THE INTRINSIC VALUE OF CONTROL (CASS SUNSTEIN)...... V P A R T 1 - E D I T O R I A L BEHAVIORAL ECONOMICS: EXPANDING BOUNDARIES (ALAIN SAMSON) ..............................................1 P A R T 2 - A P P L I C A T I O N S BEHAVIORAL SCIENCE IN PRACTICE ...........................................................................................................18 HOW BEHAVIORAL ECONOMICS IS SHAPING OUR LIVES ............................................................................................... 19 A BEHAVIORAL ECONOMICS EXPLANATION OF BRAND LOYALTY AND SWITCHING ........................................................ 27 DAMAGE BY DEFAULT: THE FLAW IN PENSIONS AUTO ENROLLMENT............................................................................ 32 COGNITIVE COLLABORATION: WHAT DATA SCIENCE CAN LEARN FROM PSYCHOLOGY ................................................ 41 THE BEHAVIORAL CHANGE MATRIX: A TOOL FOR EVIDENCE-BASED POLICY MAKING .................................................. 47 BANKING ON BEHAVIORAL CHANGE .............................................................................................................................. 54 FIVE REASONS FINANCIAL INSTITUTIONS CAN NO LONGER IGNORE BEHAVIORAL APPROACHES .................................. 64 NUDGING IN DEVELOPING NATIONS ............................................................................................................................. 66 CHOICE ARCHITECTURE IN RETAIL FINANCE: AN APPLIED PERSPECTIVE ........................................................................ 74 P A R T 3 - R E S O U R C E S SELECTED BEHAVIORAL SCIENCE CONCEPTS .............................................................................................82 POSTGRADUATE PROGRAMS ............................................................................................................. 115 POPULAR (BEHAVIORAL) SCIENCE BOOKS .............................................................................................. 133 SCHOLARLY JOURNALS WITH BEHAVIORAL ECONOMICS CONTENT .................................................. 142 OTHER RESOURCES .................................................................................................................................... 155 A P P E N D I X AUTHOR PROFILES ..................................................................................................................................... 157 CONTRIBUTING ORGANIZATIONS ........................................................................................................... 158 Behavioral Economics Guide 2017 III Acknowledgements The editor would like to thank Connor Joyce and Andreas Haberl for their help with this year’s BE Guide. Special thanks go to Cass Sunstein for writing the introduction to this edition. I am grateful for the support received by The Behavioural Architects, Behavioral Science Lab, Decision Technology, Deloitte, FehrAdvice & Partners, ING, Irrational Company, London Economics, Yale Center for Customer Insights, the London School of Economics and Political Science, and the University of Warwick. Behavioral Economics Guide 2017 IV INTRODUCTION “Don’t Tell Me What I Can’t Do!”: On the Intrinsic Value of Control Cass R. Sunstein * The Lockean Exclamation In the late, great television show Lost, one of the central characters, with the telling name of John Locke, exclaimed at crucial moments, “Don’t tell me what I can’t do!”1 Locke liked doing things, but perhaps even more, he disliked being told that he could not do things. At every turn, he insisted on his own capacity for agency. The Lockean Exclamation, as I shall call it, is related to the psychological idea of reactance (Brehm & Brehm, 1981), which refers to people’s tendency to do something precisely because they have been told not to do it. It attests to a general phenomenon of which reactance is an example: Much of the time, control, understood as liberty of action, has intrinsic and not merely instrumental value.2 When people feel that their control is being taken away, they will often rebel, even if exercising control would not result in material benefits or might produce material harms. Tocqueville ([1857] in Elster, 2007) offered a memorable account: What has always kindled such a powerful love of liberty in the hearts of certain men is its intrinsic attractiveness, its inherent charm, independent of its benefits. It is the pleasure of being able to speak, act, and breathe without constraint under the sole government of God and the law. Whoever seeks in liberty anything other than liberty itself is born for servitude. As a matter of political science, Tocqueville may or may not be right. But he is certainly capturing an important aspect of political psychology – an insistence on personal agency, or the value of control, for its own sake, “independent of its benefits.” As he immediately added, what many people “love about” liberty “is not the material goods it gives them. They consider liberty itself a good.” Both psychologists and economists have investigated the intrinsic value of control, but we need to learn much more, not least because of its immense importance to both politics and law. Whenever a private or public institution blocks choices or interferes with agency, or is perceived as doing so, some people will rebel. In extreme cases, violence is possible. Consider the highly publicized * Robert Walmsley University Professor, Harvard University. I am grateful to Tali Sharot for joint work and for many valuable discussions. 1 See https://www.youtube.com/watch?v=JAsp4rn9QnM 2 See the intriguing findings in Jung and Mellers (2016) and in particular those involving a subgroup that is especially insistent on retaining control. In a similar vein, see Tannenbaum, Fox and Rogers (2014). Behavioral Economics Guide 2017 V example in 2012. when New York Mayor Michael Bloomberg tried to ban the sale of sodas and other sugary beverages containing more than 16 ounces (see Sunstein, 2014, for a summary). This was a modest initiative, but the effort created a significant backlash, in part because of what appeared to be a loud, collective Lockean Exclamation from New Yorkers. Any form of paternalism – with respect to food, health care, and cigarettes -- risks running into a similar backlash. Of course some nations are quite different from others. The United States is especially prone to such backlashes. But we are one species. In every human heart, you can find the Lockean Exclamation. Because nudges preserve freedom of choice, they do much better than mandates and bans; in diverse nations, they turn out to be approved by strong majorities (Jung & Mellers, 2016; Reisch & Sunstein, 2016). But even when majorities embrace nudging, minorities reject them. To the extent that some nudges create concerns, it is because they too trigger a version of the Lockean Exclamation, at least in some circles. For example, default rules (such as automatic enrollment in pension plans or green energy) allow people to opt out and to go their own way. But some people see them as putting a weight on the scales, and to that extent as diminishing agency and control (Jachimowicz, Duncan, & Weber, 2016).3 More broadly, it is even plausible to think that political movements – not only the movement for sex equality and for same-sex marriage but also for Brexit and Donald Trump – have been animated, in significant part, by the Lockean Exclamation.4 In the United States, the Lockean Exclamation has played a large role in Trump’s presidency, not least in his attitude toward immigration, toward NATO, and toward the Paris agreement involving climate change. The intrinsic value of control matters for business as well as politics and law. To what extent should companies preserve freedom of choice -- and emphasize to consumers and employees that they ultimately have freedom to go their own way? Banks, grocery stores, soft drink companies, cell phone companies, and automobile manufacturers face that question every day; so do employers of every kind. The answer is greatly complicated

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