Why Behavioral Economics Is Cool, and I’m Not

The Huffington Post:

Here are some of my favorite surprising studies. What do they have in common?

• People are more likely to buy jam when they’re presented with 6 flavors than 24.
• After inspecting a house, real estate agents thought it was $14,000 more valuable when the seller listed it at $149,900 than $119,900.
• When children play a fun game and then get rewarded for it, they lose interest in playing the game once the rewards are gone.
• People conserve more energy when they see their neighbors’ consumption rates.
• If you flip a coin six times, people think Heads-Heads-Heads-Tails-Tails-Tails is less likely than Heads-Tails-Tails-Heads-Heads-Tails, even though the two are equally likely.
• Managers underestimate the intrinsic motivation of their employees.

They’ve all appeared in the media as research done by behavioral economists, when in fact they were done by psychologists.* This is a common mistake. As one Nobel Laureate in economics observes: “When it comes to policy making, applications of social or cognitive psychology are now routinely labeled behavioral economics.”

Read the whole story: The Huffington Post

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