
Why Is Behavioral Economics So Popular? - malshe
https://www.nytimes.com/2018/10/06/opinion/sunday/behavioral-economics.html
======
m_ke
I blame freakonomics. It's a great podcast (and book) but it occasionally
pushes some shoddy science.

Also, TED and TEDx for popularizing pseudo intellectual garbage.

[https://www.vox.com/science-and-
health/2018/9/19/17879102/br...](https://www.vox.com/science-and-
health/2018/9/19/17879102/brian-wansink-cornell-food-brand-lab-retractions-
jama)

[http://nautil.us/blog/impossibly-hungry-
judges](http://nautil.us/blog/impossibly-hungry-judges)

~~~
platz
TED and TEDx had great content in the first few years, when profs were able to
present their lifetime's work.

Once they burned through those folks, they turned to cranks/homeopaths/etc

~~~
thoughtexplorer
It sucks what happened with them. TED/TEDx talks were awesome and I used to be
able to recommended people watch any and all of them.

Until I started seeing stuff like this
[https://www.youtube.com/watch?v=w8J5BWL8oJY](https://www.youtube.com/watch?v=w8J5BWL8oJY)

~~~
platz
lol i skipped to the end and instantly felt bad for the audience even with my
audio off

~~~
chasedehan
my god, that is terrible! I generally think there is good content in the TED
talks, but I now won't even look at the TEDx talks because regionally they do
have to turn to the cranks.

------
nabla9
Behavioral Economics is applying knowledge of human behaviour to economics.
There is need to go to the opposite direction. Economics analysis of applied
to human behaviour.

Biases are are not always errors. They can be cognitive shortcuts and
optimizations that may be reasonable heuristic.

There Is More to Behavioral Economics Than Biases and Fallacies
[http://behavioralscientist.org/there-is-more-to-
behavioral-s...](http://behavioralscientist.org/there-is-more-to-behavioral-
science-than-biases-and-fallacies/)

> A widespread misconception is that biases explain or even produce behavior.
> They don’t—they describe behavior. The endowment effect does not cause
> people to demand more for a mug they received than a mug-less counterpart is
> prepared to pay for one. It is not because of the sunk cost fallacy that we
> hang on to a course of action we’ve invested a lot in already. Biases,
> fallacies, and so on are no more than labels for a particular type of
> observed behavior, often in a peculiar context, that contradicts traditional
> economics’ simplified view of behavior.

>The conversation around biases is almost uniformly negative: they screw up
our decision making, or undermine our health, wealth, and happiness. However,
biases evolved with us, and for good reasons...

~~~
fanzhang
It's widely acknowledged in behavioral economics that biases have their uses.
In fact, usually the phrase used to describe them is "Heuristics and
Biases"[1].

It's first and foremost a heuristic -- a reasonably good way to generate good
behavior. Secondarily, in certain specific situations, it causes non-optimal
behavior.

[1] ( [https://www.amazon.com/Heuristics-Biases-Psychology-
Intuitiv...](https://www.amazon.com/Heuristics-Biases-Psychology-Intuitive-
Judgment/dp/0521796792) )

~~~
jonny_eh
Exactly, discovering economic biases is like discovering optical illusions.
The existence of optical illusions doesn't mean that human sight is always
flawed, only flawed in certain edge cases.

~~~
neuronexmachina
"All models are wrong, but some are useful." \-- statistician George E.P. Box

------
sien
The guy who Tversky and Kahneman really hated, Gerd Gigerenzer had a very good
answer to a lot of their work. He pointed out that:

A critic of the work of Daniel Kahneman and Amos Tversky, Gigerenzer argues
that heuristics should not lead us to conceive of human thinking as riddled
with irrational cognitive biases, but rather to conceive rationality as an
adaptive tool that is not identical to the rules of formal logic or the
probability calculus. He and his collaborators have theoretically and
experimentally shown that many so-called cognitive fallacies are better
understood as adaptive responses to a world of uncertainty—such as the
conjunction fallacy, the base rate fallacy, and overconfidence.[4]

[https://en.wikipedia.org/wiki/Gerd_Gigerenzer](https://en.wikipedia.org/wiki/Gerd_Gigerenzer)

His books are well worth a read.

Nassim Taleb also has a similar criticism in that he says that Kahneman and
Tversky essentially said that humans don't act according to theoretical rules
but instead have their own heuristics that have been derived from dealing with
an uncertain world throughout history:

[https://twitter.com/nntaleb/status/883689826335281153?lang=e...](https://twitter.com/nntaleb/status/883689826335281153?lang=en)

~~~
Balgair
Rationality is somewhat of a new concept to humans. It's somewhat surprising
that economists took it so literally for that long and put and any real faith
in it. The lemma of rationality does make the math a LOT easier, and we're
doing better now about the irrationality aspects, but that spurt of faith in
rationalism was quite interesting.

For the _large_ majority of our history, we've not been rational in the least.
HN had a good discussion [0] on the Medieval Mindset [1] earlier in the
summer. For ~1000 years in the Medieval period, the main mindsets were not
rationality vs. irrationality, right vs. less-wrong vs. wrong, etc. But more
Pious vs Impious, Cruel vs Kind, The Ideal vs the Real, etc. The people were
no less people, but their heads weren't ours.

What economic theories will come next, what new ways of thinking, what new
mindsets? We're so focused on the rational, the 'right' answers, these days.
But life, as we all know, is VERY stochastic ( a fancy word for random ).
Maybe new mindsets about the randomness, bounded and given standards of
deviation, will be a new paradigm, not just in economics, but in everything we
do.

[0]
[https://news.ycombinator.com/item?id=17058487](https://news.ycombinator.com/item?id=17058487)

[1] [https://coinsandscrolls.blogspot.com/2017/09/thinking-
mediev...](https://coinsandscrolls.blogspot.com/2017/09/thinking-medieval-
seeking-endarkenment.html)

------
rossdavidh
I think it's mostly the weakness of the pre-behavioral economics. The status
quo was economics that, almost on principle, ignored the way actual humans
behave. Any amount of consideration of how actual humans behave, however
limited or flawed, will look like an improvement. It's much like the way
behaviorism in psychology, which seems lacking nowadays, actually looked good
compared to the Freudian school of psychology it was displacing.

~~~
conanbatt
> The status quo was economics that, almost on principle, ignored the way
> actual humans behave

Why do people say this. This was never true. The Wealth of Nations is
basically a compendium on human behavior, and that was 200 years ago.

~~~
rossdavidh
The Wealth of Nations was not the status quo, though. The neoclassical model
of economics was much more committed to a model in which the individual
maximizes some utility function. The neoclassical model certainly built on
Adam Smith, but by no means the same as, and one of the differences was that
neoclassical economics tried to find ways to ignore or abstract away anything
to do with human psychology.

------
bko
Much of behavioral economics is based on a very shaky foundation of
psychology.

For instance, the priming experiments cannot be reproduced.

> This result confirms Kahneman’s prediction that priming research is a train
> wreck and readers of his book “Thinking Fast and Slow” should not consider
> the presented studies as scientific evidence that subtle cues in their
> environment can have strong effects on their behavior outside their
> awareness.

[https://replicationindex.wordpress.com/2017/02/02/reconstruc...](https://replicationindex.wordpress.com/2017/02/02/reconstruction-
of-a-train-wreck-how-priming-research-went-of-the-rails/)

~~~
40acres
I know that psychology is particularly devasted by the replication crises but
aren't branches of research affected as well?

~~~
cultus
Medicine is being hit almost as bad. In general, fields where a lot of studies
have low statistical power(usually due to noisy data and/or small sample
sizes) are the hardest hit. Statistical power is the chance that a significant
result is found if the effect is indeed significant (one minus the chance of a
false negative). Counter-intuitively, this increases the chance that a given
significant result is invalid.

Combine that with non-reporting of negative results and you basically have a
huge pile of bullshit.

~~~
ItsMe000001
I would extend to to "statistics based knowledge" in general. If you don't
understand the mechanism it's not real knowledge.

For example: You have a drug that 100% helps in a certain context (of what the
problem is and the person's genetics plus maybe even epigenetics, and maybe
even things like what they eat and what environment they are exposed to).

However, clinical trial studies don't go very deep in separating different
kinds of people. We just don't know enough, we don't know how to even measure
most thing, and when we do it's extremely costly. And since we don't
understand the mechanism - if we did we didn't have to go through the trials -
they are needed because even we have _a_ mechanism we are not sure what else
the drug does in the body, or about follow-up and higher order effects - we
would not know what to look for anyway. Plus, without full understanding of
the mechanism it's hard to combine the new "knowledge" with other knowledge.
The experiment you gained the data from is very specific and results are hard
to generalize.

So the result is the drug will be a complete failure, because we are unable to
tell _which_ people would benefit.

That's always the problem: When you don't have a very good understanding of
the mechanism and all the consequences you have to be lucky that the
population you study is more or less the correct one. You don't even know when
you got the wrong one. If the drug - but same in any other field that uses
statistics - fails for 95% of people you may still have a hit for a sub-
population (it's not as easy as "it's the other 5%" of course).

There are people working specifically on looking closer at some "failed
drugs". They have been able to find a few "miracle drugs" that way. They only
help certain people (they use genetic testing) but when they do they do great.
But they failed their initial clinical trials big time.

Over the years I have gotten much more skeptical of all statistics based
"knowledge". Reading those studies always leaves a strange taste in my mouth.
Something doesn't feel right. It does not taste like _knowledge_. I see the
relevance given that it often is the only way to make practical progress of
course.

~~~
cultus
>That's always the problem: When you don't have a very good understanding of
the mechanism and all the consequences you have to be lucky that the
population you study is more or less the correct one. You don't even know when
you got the wrong one. If the drug - but same in any other field that uses
statistics - fails for 95% of people you may still have a hit for a sub-
population (it's not as easy as "it's the other 5%" of course).

Good point, but this kind of subgroup analysis also runs into the multiple
comparisons problem. If you test all kinds of subgroups (or just do a lot of
any kind of tests), chances are good that you will run into false positives.
In such scenarios, it becomes more probable than not that a given positive
result is in fact false. Combine that with the base-rate fallacy (the good
majority of drug trials yield null results, but this is not taken into
account) and you are in really bad shape.

There was a replication study a while ago that tried to replicate IIRC 50 or
so "landmark" cancer studies, and only came up with significant results in 6
cases.

Bayesian methods go a long way towards solving these issues, but there is no
cure for low-power studies. They just can't tell you much, and will lead you
heavily astray if you don't properly account for multiple comparisons, etc.

>Over the years I have gotten much more skeptical of all statistics based
"knowledge". Reading those studies always leaves a strange taste in my mouth.
Something doesn't feel right. It does not taste like knowledge. I see the
relevance given that it often is the only way to make practical progress of
course.

Clinical studies of new drugs have uncertainty. Thus any decision-making based
on results must take this uncertainty into account. You can't get away from
statistics here. The bad feeling in your mouth may be from the unintuitive and
usually inappropriate use of P-values and null-hypothesis statistical tests.
The vast majority of researchers are actually completely mistaken on what
P-values even mean. Most think that they are "the chance of a false positive"
or something similar, which is completely wrong.

Bayesian methods help here, because they are the only valid way of combining
past information with new information.

~~~
ItsMe000001
> but this kind of subgroup analysis also runs into the multiple comparisons
> problem. If you test all kinds of subgroups (or just do a lot of any kind of
> tests), chances are good that you will run into false positives.

As I said, the issue is statistics based "knowledge". What you just said just
continues down that path, so of course it does not solve the problem, actually
makes it worse because now we throw more randomness at randomness and get
random matches - but still not one bit more understanding.

~~~
cultus
Most all knowledge is "statistics based." Anytime you are not 100% sure about
something, then your knowledge about that thing is inherently probabilistic.
There is absolutely no way around it.

You can't get away from statistics. You can only replace bad statistics with
good. If you ignore these statistical aspects of an experiment such as
multiple comparisons, then your reasoning is even worse!

You can't just "decide" to not use "statistics based knowledge" any more than
you can decide that your experiment is not subject to uncertainty or error.
You could say that, but that doesn't make it true.

Bayesian statistics are much more intuitive, however. Baye's theorem is
actually the generalization of contrapositivity (If A implies B, then not A
implies not B) to situations where we are not certain of A and B.

~~~
ItsMe000001
Why do you re-interpret what I wrote instead of going with what I wrote? Why
do you lecture me about things that I didn't write?

~~~
cultus
>As I said, the issue is statistics based "knowledge". What you just said just
continues down that path, so of course it does not solve the problem, actually
makes it worse because now we throw more randomness at randomness and get
random matches - but still not one bit more understanding.

You seem to be saying that nothing is gained with statistics knowledge, and
attempting to use better statistics is just throwing "randomness upon
randomness." If this isn't true, then you are being unclear. All of your
criticisms about statistics are very vague, and do not cite any specific
problems.

I gain understanding from "statistics-based knowledge." If you do not, then
that is a problem you should solve by reading more about these issues.

------
dopamean
When I was in college (2004) the school I went to had an interdisciplinary
major called Philosophy, Politics, and Economics (PPE). It has a "thematic
concentration" called "Choices and Behavior" that was very popular. Many, many
students majored in PPE so I don't mean to comment on literally all of the
people who chose it, however, amongst my circle of friends the ones who chose
"Choices and Behavior" chose it because in their minds there was something
cool about the idea of using psychology to manipulate people. I don't think
they had anything nefarious in mind but they were definitely attracted to the
magical language used to describe the practical applications of the things
they would learn. It actually felt somewhat similar to the way my software
developer friends talk about machine learning today.

------
zebrafish
Nitpick here.... There seems to me be to be significant difference between
"loss" in terms of something already tangibly owned and "loss" in terms of
missing out on an opportunity.

Of course marketing schemes for "act now or lose out" won't work. I don't
currently experience the opportunity and therefore losing out exerts no power
over me. However, losing a mug when I already own the mug would demand a
higher price from me. I would agree with Dr. Thaler that the inertia thing is
a minor point about terminology.

Call it loss aversion or call it inertia. Marketing schemes that include the
word "loss" in their pitch are not using the same strategy that behavioral
economists are talking about here.

~~~
gowld
If loss aversion exists but it's not inertia, then you should expect to see
"win aversion" as much as "loss aversion". Do you?

~~~
zebrafish
I'm not saying it isn't inertia. I'm saying that Thaler is right in saying
that is a semantics issue. Call it what you want, the actual behavior is real.

------
40acres
There's a lot of pop science and good marketing around behavioral science but
at it's core I think it helps complete the picture of what economic research
tries to deliver.

Prior to being introduced to behavioral economics my exposure to economics was
very quantitative, while this model is necessary it's incomplete. A lot of
economics seems to assume that the actors are equally rational beings but in
the real world that's just not the case. Behavioral economics seems to bring
actual human experience into economics.

~~~
chimeracoder
> A lot of economics seems to assume that the actors are equally rational
> beings but in the real world that's just not the case. Behavioral economics
> seems to bring actual human experience into economics.

This is a huge misconception. Economics doesn't assume that actors are
perfectly rational actors, any more than physics assumes that interactions
always take place inside a frictionless vacuum. It's just one model that's
used as a starting point to understand mechanical interactions.

~~~
BeetleB
>Economics doesn't assume that actors are perfectly rational actors

At the undergrad level, it often does. I had a friend who had just become an
assistant professor in economics. He was teaching an undergrad class, and
wanted to pose a few scenarios to them. While preparing his lecture notes, he
called me up and gave me the scenarios and asked how I would behave. These
were not "hard" or "wild" scenarios. Mostly day to day stuff.

I gave my answers. On several of them, he told me I was giving irrational
answers. This was a problem for him, because if his students answered
likewise, they wouldn't support the points he was trying to make in the
lecture.

He and I had a similar outlook on life. So I asked him: "Would you behave
differently from me?"

Him: "No"

Me: "So what is the value of the economic model you're teaching if even you
would not behave the way the theory indicates you would?"

As an aside, and this always comes up when we talk about rationality and
economics. The disconnect is often that basic economics courses have a narrow
view of people's motives and desires. It is often simplified to "optimizing
for money" or "optimizing for time". Rarely things like "optimizing for mental
stress". Pretty much everything someone does is for some perceived gain. That
gain is often not what economists teach it is.

~~~
tvanantwerp
I was once asked in an economics lecture what I would do in a particular
situation. So I told the professor how I would try to proceed, only to be told
that I was wrong--I would instead do this other thing that hadn't occurred to
me at all.

~~~
Noumenon72
Economics is often right about that kind of thing. You think you will not
snack as much if you put your M&Ms in a faraway place, but you end up doing
the incentive-predicted thing and eating more M&M's each time you go to get
some.

------
thedudeabides5
"Why Is Behavioral Economics So Popular?"

Probably because people got sick of a guy with a formulae lecturing them about
how human's _aught_ behave as opposed to developing functional models of how
humans _do_ behave

[https://en.wikipedia.org/wiki/Ultimatum_game](https://en.wikipedia.org/wiki/Ultimatum_game)

The Nash Equilibrium of this game is to offer the other person $0...unless you
incorporate the idea that humans may care about more than pure monetary
payoffs in their mental gymnastics.

Kinda like when that friend from undergrad studying business told you that
paying anything more your minimum tax bill was 'irrational'

------
calhoun137
Behavioral economics is popular because its a better model. It's clear that
any model of human behavior and decision making will necessary be very
complicated. It doesn't make any sense to right at the start decide that the
only factor that will be considered is financial expected value. Even though
any model based on such an assumption will be severely flawed, this is the
view of main stream economics, and this explains why behavioral economics is a
better model.

------
chuckgreenman
Merlin Mann coined, or at least heavily uses the phrase "turns out journalism"
which I really like. We like to have something that subverts our expectations.
At some level we want to be told that the advice we don't like isn't actually
useful.

~~~
gowld
This very website was built on a foundation of "turns out", one of Paul
Graham's favorite rhetorical crutches.

[http://jsomers.net/blog/it-turns-out](http://jsomers.net/blog/it-turns-out)

------
chasedehan
Behavioral Economics has only gotten "so popular" in non-academic circles.
This is mostly due to the quasi-science of economics where we try to
mathematically model the world. These "cute Freakonomics" type studies, while
publishable in some outlets, haven't even come close to displacing traditional
microeconomic foundations in mainstream economics.

I'm an Economics PhD and former professor and most of the research isn't taken
very seriously. Everyone acknowledges that people don't behave "rationally",
but no one yet has been able to figure out how to build these behavioral
assumptions into a working model that is actionable.

~~~
gowld
Aren't "loot boxes" and casinos and the free-to-play game industry a great
example of behavioral economics in action?

~~~
alephnil
That some businesses have figured out how to exploit people's irrationality
does not mean that economists have a good model for how actual people behave,
and how it differs from rational behaviour.

------
sonnyblarney
It's classic pop psychology (which we've always loved) mixed in with some data
points so it's like crack for the 'modern' bourgeois. So it's like 19th/20th
century political theory minus the ideology, plus the 'science' ... the
ultimate 'educated' parlour room fodder!

------
jonbarker
Because it's interesting according to this definition:
[https://www.sfu.ca/~palys/interest.htm](https://www.sfu.ca/~palys/interest.htm)
. Also the article mentions the mug example (selling a mug for more if you
have one than you'd be willing to buy it for) as being a classic behavioral
example of loss aversion. I actually thought it was an example of the
endowment effect according to behavioral economists.

------
quadrangle
Because almost anything that bothers being at all empirical is better than the
nonsense we get from classical economics.

Now we just need a revolution in economics comparable to the cognitive
psychology movement that got that field beyond Skinnerian behaviorism.

------
benrawk
I know this paper well (and the larger point being made in the paper; I have
seen Dr. Gal present on it in seminars). I think the point he is trying to
make is that what we really need for understanding of human behavior is good
psychological theory of how humans operate. In many cases (loss aversion being
one of them, per Dr. Gal), behavioral economics _describes_ the data, but does
not provide a deeper analysis of _why_ the data are the way they are (that is,
why the humans being studied acted as they did). Of course not true of all
behavioral economics, but some of it.

~~~
sibmike
I'd like to add that the data comes from experiments, which are simplified
versions of real life problems. Oftentimes, "irrational" behavior depends on
the way simplification is made and have no chances to generalise outside the
laboratory, because in real life signal is more complex and informative. Yet a
paper will be published stating "people behave irrationally". (in the lab with
given peculiar instructions)

------
kolbe
It's easy to understand and relate to. To even comprehend contemporary
research in most scientific disciplines, you need a seriously strong
understanding of math or chemistry--a level so high that it cannot be
'popular'. Behavioral Economics only require remedial algebra, statistics and
literacy, and the topics they address are usually familiar to everyday
people's lives.

------
gowld
The subtitle is entertaining: "The recent vogue for this academic field is in
part a triumph of marketing."

and in the article: "It reflects the widespread perception that behavioral
economics combines the cleverness and fun of pop psychology with the rigor and
relevance of economics."

The author is using behavioral economics to argue against behavioral
economics.

~~~
sailfast
Agreed - I'm confused by this op-ed. A professor of marketing is upset that
marketing is not getting enough credit for the ideas that are also present in
behavioral economics ('fame of behavioral econ is a triumph of marketing' har
har).

The main purpose seems to be to crap on Thaler for dismissing his critique of
loss aversion instead of embracing his hypothesis on the buy-side. This
neither discredits behavioral economics, nor makes a clear case for how
academe related to marketing would better humanity or its understanding.

------
tabtab
Because when you can't win by building a better mouse-trap, you try to win by
tricking the mice.

~~~
AstralStorm
If your "trick" does not actually work, you're wasting time and resources.

Most of behavioral economy is not seriously tested, because the endpoint is
not "tricking the mouse" but positioning yourself as a trickster educator, a
place that cannot be blamed.

One of classic cons.

~~~
lucas_membrane
> If your "trick" does not actually work, you're wasting time and resources.

Many of the popularly-cited experiments both in behavioral economics and in
psychology involve misleading or deceiving the experimental subjects, and many
more simply conceal their objectives. The assumption that the suckers never
caught on and the results should be interpreted accordingly is seldom
questioned. In some cases, the assumption is verified by asking the subjects
about their motivations post-mortem, ignoring the long-standing axiom of
applied behavioral economics (business) that there are two reasons anyone does
anything, the one they will tell you and the real one.

The null hypotheses in these experiments ought to be (1) the subjects know or
can figure out what the experimenters are looking for, and (2) the subjects
are there because they want to help the experimenters.

Consider the subject who is paid a small sum to participate and interacts with
a either a researcher who must publish or perish or one who will put another
batch of subjects through a similar rigmarole next year if they cannot get
their dissertation accepted this year. What does motivational psychology say
about the behavior of such a subject? Is such a search for truth better than a
congressional committee?

------
mcrad
I tend to think this is perfectly correlated with the rise of Big Data. Just
as banks scored your likelihood to repay a loan based on your past behavior,
marketeers want to score your economic value based on the same and more
(transaction history + whatever personal data history assumed to be relevant).
I suppose this doesn't follow the real definition of behavioral economics but
it sure seems related - like let's hire a data science expert to write
economic models on consumer behavior(?) In short, this field is popular
because it gives power to the internet Giants.

~~~
gowld
Isn't that regular economics? Big Data marketers don't care about
understanding psychology, they just care about what generates conversions.
"Big data" means you make decisions automatically from data _without_ forming
theories, since you have plenty of signal.

~~~
mcrad
Micro-economics. I suppose the point is if you aren't applying expertise in
psychology then it's not "behavioral"; however, big data is essentially the
push to model your behavior to greater level of precision (nano-economics?). I
don't see how signal:noise ratio fits in at all.

------
motiw
Maybe because it has uncharted economic value, especially with access to large
number of people via the internet, large number means that taking advantage of
small behavior can translate into much value.

~~~
John_KZ
Great point. Javascript behavioral tracking and shadow profiles gave
advertisers and various experts (psychologists, sociologists etc) both the
incentive and the unprecedented ability to perform experiments on hundreds of
thousands of clueless people. All that in real time, in their "natural"
environment, with real stakes. Of course we can model this type of economics
better than we did 10-20 years ago.

------
mcguire
" _In order to appeal to other economists, behavioral economists are too often
concerned with describing how human behavior deviates from the assumptions of
standard economic models, rather than with understanding why people behave the
way they do._ "

That is...actually, a good point, and exactly describes something I'd noticed.

One of the problems with economics is the assumption of the "perfectly
rational actor", which sometimes leads to economic's descriptive vs.
prescriptive issue: someone will create a massively complicated scheme that
maximizes some positive value under a certain set of assumptions and then
assume that people actually behave like that.

Some of what I've read, including by Richard Thaler, who I otherwise rather
like, buys into that scenario, saying "no, this is what they do; they behave
_irrationally_ ". Sure, people aren't by any means perfectly rational, but
it's not irrational to not perform a complicated maneuver that's only useful
in a specific, odd, circumstance.

There's another interesting bit from the article:

"[In the class mug experiment showing "loss aversion,"] _the participants may
not have had a clearly defined idea of what the mug was worth to them. If that
was the case, there was a range of prices for the mug ($4 to $6) that left the
participants disinclined to either buy or sell it, and therefore mug owners
and non-owners maintained the status quo out of inertia. Only a relatively
high price ($7 and up) offered a meaningful incentive for an owner to bother
parting with the mug; correspondingly, only a relatively low price ($3 or
below) offered a meaningful incentive for a non-owner to bother acquiring the
mug._

" _In experiments of our own, we were able to tease apart these two
alternatives, and we found that the evidence was more consistent with the
“inertia” explanation. Dr. Thaler has dismissed our argument as a “minor point
about terminology,” since the deviant behaviors attributed to loss aversion
occur regardless of the cause. But a different account for why a behavior
occurs is not a minor terminological difference; it is a major explanatory
difference. Only if we understand why a behavior occurs can we create
generalizable knowledge, the goal of science._ "

"The deviant behaviors attributed to loss aversion?" Not only is there nothing
deviant about the behavior, it's not in any sense "loss aversion". In fact,
it's perfectly rational, given limited rationality resources, not to engage
the whole engine in an otherwise minor scenario.

------
tim333
The author looks at some rather trivial aspects of behavioural economics or as
he puts it

>In this respect, behavioural economics can be thought of as endorsing the
outsize benefits of psychological “tricks,”...

But it also covers bubbles and crashes which have major effects in the
billions/trillons financially and with millions having their jobs and housing
effected. It would seem sensible to take that stuff seriously.

------
resters
Insightful essay. The _nudges_ he describes were elaborated in great detail in
the book called _Nudge_ by Richard Thaler.

In the book, Thaler describes nudges such as placing the fresh fruit in the
school lunch line in a more easily reachable location than the junk food. The
idea is that kids will be more inclined to choose a piece of fresh fruit if
it's in easy reach but the chocolate bar requires bending down, etc.

While such nudges may sometimes be measurably effective, we must also realize
that the idea of socially beneficial nudges evokes a sort of utopian
paternalism.

The idea behind _Nudge_ paints the picture that there is a light-weight,
unobtrusive version of central planning (or central _nudging_ ) that can
achieve some of the utopian outcomes that planners wish for, but which is less
encroaching upon individual freedom.

At what point do situational nudges start to feel like social nudges? What if
the chubby kid who wants the chocolate has to humiliate himself by reaching
far overhead and fishing around blindly in an out-of-reach bin to find the
chocolate while everyone else waits impatiently?

When does spending hours to opt out of helpful services become an
inappropriate encumberment?

Google just launched sentence completion in gmail. Combine this with nudges
and _fuck you_ won't be corrected to _duck you_ , the typist will see an
autocompleted _hey I 'm feeling really frustrated about what you said right
now_ ready to accept with the tap of a single button.

Nudges are meant as a mechanism of social control. Gal points out wisely that
if we rush to judgment about the _why_ of behaviors, then our behavioral
economic remedies ( _nudges_ , etc.) might be terribly wrongheaded.

~~~
tcopeland
"Nudge" is on the Center for Homeland Defense and Security reading list:

[https://www.chds.us/c/hsbooks](https://www.chds.us/c/hsbooks)

------
elvinyung
Interestingly, if Scott Alexander is right, behavioral economics stopped being
en vogue a few years ago. From Slate Star Codex's review of _The Black Swan_
[1]:

> All of them continue to do great object-level work in their respective
> fields, but it seems like the “moment” for books about rationality came and
> passed around 2010. Maybe it’s because the relevant science has slowed down
> – who is doing Kahneman-level work anymore? Maybe it’s because people spent
> about eight years seeing if knowing about cognitive biases made them more
> successful at anything, noticed it didn’t, and stopped caring.

[1] [http://slatestarcodex.com/2018/09/19/book-review-the-
black-s...](http://slatestarcodex.com/2018/09/19/book-review-the-black-swan/)

------
Dowwie
Why has Economics been so popular? What has Economics' mathematically-
validated storytelling gotten wrong and how has that impacted society?

------
purplezooey
We need less behavioral economics and more get off your lazy arse and vote
economics. 27% voting rate for those aged 18-34.

------
tw1010
Why wouldn't it? It's a more accurate model than what came before it, the
rational actor model.

~~~
nybble41
To support a claim that an economic actor is not rational you would first need
to assert that you are more familiar than they are with their personal
preferences and their understanding of the available options, which seems to
me the height of arrogance. Which do you suppose is more likely: that people
_deliberately_ choose to act in ways that they _know_ are not in their own
best interest, as they define it, or that they _are_ acting rationally but
their idea of what is in their best interest differs from your own?

A key element of the rational actor model is that there is no way to know
anyone else's preferences aside from observing the choices they make. Even
asking them directly is not considered an authoritative source, since
preferences can change at any time and people don't always know just what they
would choose until they're actually confronted with the choice.

------
anon49124
I would also ask: why are "useless" majors so popular? Ostentatious elite
uselessness?

