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.