Why Behavioral Economics is Cool, and I’m Not
Is behavioral economics less obvious and more rigorous than psychology?
Posted Jun 13, 2014
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 six 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.*
It happens to me regularly: I’m an organizational psychologist, but I get introduced at least once a week as a behavioral economist. The first time this happened before a speech, I attempted to set the record straight, telling the executive that all of my degrees were in psychology. His response: “Your work sounds cooler if I call you a behavioral economist.”
Why would that be? Let’s consider five possible explanations and the evidence for each:
Hypothesis 1: Behavioral economists are hotter than psychologists.
Survey says: false. In a study of the physical attractiveness of professors in 36 different fields, psychologists were #10 and economists were #30.
Hypothesis 2: Behavioral economists do more interesting work than psychologists.
This one is false too. Exhibit A: Daniel Kahneman, the grandfather of behavioral economics and author of Thinking, Fast and Slow is a psychologist. Despite winning his Nobel Prize in economics, he holds a Ph.D. in psychology and has been a psychology professor for his entire career. Exhibit B: Dan Ariely, a leading scholar in behavioral economics and author of Predictably Irrational, has multiple degrees in psychology and zero in economics.
Hypothesis 3: Behavioral economists do more interesting work than psychologists who aren’t named Dan.
False. Yes, great books like Freakonomicsand Nudge are by economists, but the majority of bestselling social science books are about psychology. Most of the studies covered in Malcolm Gladwell’s books are by psychologists (he writes more about sociology than economics too). And of the 20 most-viewed TED talks, none are by economists or about economics. By comparison, three of the top talks are by psychologists (Amy Cuddy on body language, Dan Gilbert on happiness, Shawn Achor on happiness), three more directly reference psychological research (Dan Pink on motivation, Susan Cain on introverts, Pamela Meyer on lie detection), and several others deal with psychological topics (including Ken Robinson on creativity in schools, Simon Sinek on leadership and Brene Brown on vulnerability).
Hypothesis 4: behavioral economics sounds less obvious than psychology.
True. Economics is the science of efficiently allocating scarce resources, and it generates lots of clever, unexpected solutions to problems. For example, who would have ever thought to stop subway robberies by guarding turnstiles?
Psychology, on the other hand, seems like common sense. By virtue of owning a brain, we’re all experts in psychology. Why do we need psychologists to teach us the obvious? Here are three ideas from psychology that aren’t exactly earth-shattering:
- If you want someone to say yes to a small request, giving a bad reason is worse than no reason at all.
- If you want to be happier, counting more blessings is better than few.
- If you’re angry, venting is a good way to calm down.
Duh! But here’s the catch: all three findings are the opposite of what psychologists have discovered.
Ellen Langer and her colleagues found that if you ask to cut in front of people in line at a copy machine “because I’m in a rush,” 94% say yes. If you give no reason, only 60% say yes. But if you give a bogus reason, “because I have to make copies,” 93% say yes. The use of a logical “because” is enough to trigger a mindless yes, even though the information that follows provides no new information.
Research led by Norbert Schwarz suggests that when you name three good things about your life, it’s easy to think of, and you use that as a clue that your life is pretty good. But if you have to name a dozen good things about your life, you’ll have to think harder, and you might draw the conclusion that your life is not quite as great.
And studies led by Brad Bushman show that venting makes us angrier and more aggressive. When angry people were randomly assigned to hit a punching bag, they became angrier than people who were distracted or did nothing at all—and they were more likely to deliver loud, unpleasant blasts of noise to the person who made them mad.
Psychology isn’t as straightforward as it seems. As sociologist Duncan Watts points out in his book, everything seems obvious once you know the answer. (For more examples, see The 50 Great Myths of Popular Psychology.)
Hypothesis 5: behavioral economics is viewed as more rigorous than psychology.
True. When people think of economists, they picture smart people crunching numbers. When they think of psychology, they picture Sigmund Freud lying on a couch telling them they failed a driving test because they failed to kill their fathers and sleep with their mothers. (If you object to that, don’t worry; you’re in denial.)
“Psychologists… are almost forced to accept the label of behavioral economists, even if they are as innocent of economic knowledge as I am,” Kahneman writes, and “rewarded by greater attention to their ideas, because they benefit from the higher credibility that comes to credentialed economists.”
Psychology has come a long way since Freud, but the brand hasn’t caught up. The new psychological science of the mind and behavior is based on randomized, controlled experiments with measurable behaviors as well as fMRI and physiological data. Ideally, we’ll start rebranding psychology as a source of interesting, rigorous ideas. Alternatively, Kahneman proposes that when it comes to formulating policy, we should stop drawing major boundaries between fields and just call ourselves behavioral scientists.
Either way, let’s say goodbye, Freud.
Adam is the Wharton Class of 1965 Professor of Management and Psychology, and the bestselling author of Give and Take. Although he thinks behavioral economists are cool, he is not one of them. Sign up for his free newsletter at www.giveandtake.com.
*Here are links to the studies mentioned in the intro: choice overload in jam purchasing, social proof in energy consumption, extrinsic rewards undermining intrinsic motivation in game play, anchoring with listing prices in real estate, the representativeness heuristic in a coin toss, and managers underestimating intrinsic motivation.