Posted by Center for Decision Research on June 8, 2022
On Tuesday, June 7, 2022, Nobel laureate and Chicago Booth professor Richard Thaler sat down with Greta Johnsen, host of WBEZ's Nerdette podcast, for an interview at the Gleacher Center. With questions from Johnsen and audience members, the conversation explored how to employ nudges on a variety of scales, from improving one’s daily habits to addressing major issues like climate change and gun violence. What follows is a recap of that conversation.
Differentiating Psychology and Behavioral Economics
“Behavioral economics is just economists stealing from psychology,” Thaler joked. He went on to explain that one way behavioral economics is distinctive is that is operates in the context of markets. In his Nobel Prize acceptance speech in Stockholm, Thaler slyly noted that he discovered humans in a place where they had not been seen before: economics. While traditional economists view each person in the market as rational “agents,” behavioral economists tend to treat thinkers as they are, not as they ideally should operate.
Nudging for Good and Bad
Johnsen asked Thaler about one new feature of the book, the inclusion of “sludge,” a term Thaler coined on Twitter referring to evil nudges. Thaler highlighted common frustrations when canceling a gym membership or some online subscriptions. Barriers like requiring members to cancel in person or by certified letter are sludge that Thaler believes are bad business and ethically dubious.
One question submitted by an online viewer asked whether sludge should be outlawed. But Thaler believes that the distinction between nudges and sludge can be hard to define, and as a result, difficult to regulate. For example, some cinnamon roll shops pump sweet smells into the air to tempt people into consuming their high-calorie treats. Though it might encourage unhealthy behavior, this practice probably shouldn’t be banned, he says. Instead, Thaler likes to see how far we can go without legal intervention. This is another reason why Thaler encourages his students to use their knowledge of behavioral science to “nudge for good” and run the kinds of organizations they would patronize.
Choice Architecture's Role in Large-Scale Social Problems
Johnsen asked how nudging can help solve some of the biggest challenges in current events like climate change and gun violence. Thaler believes smart choice architecture can help move the needle on most issues, but we shouldn’t rely exclusively on nudges to solve our problems. Nudging can help curb energy-wasting behaviors, for example, but Thaler also advocates for a carbon tax that reflects the true cost of carbon emissions.
To address gun safety, Thaler again believes a mix of nudges and regulation is appropriate. Certain military-style weapons need an outright ban, Thaler suggested. But effective choice architecture can also help prevent some gun accidents and crimes. For example, if owners lock their guns in a safe, it makes it harder for children to access them. Furthermore, research by UChicago's Jens Ludwig shows many crimes are committed from brief moments of rage, so if people are slowed down from accessing their guns, that's more time to cool down and de-escalate situations.
Nudge Units Around the Globe
Johnsen asked about governments who started implementing behavioral science in their administrations. Inspired by Nudge, British Prime Minister David Cameron promised he would implement social science in public policy when elected. Thaler was recruited in this project, running experiments on what letters were more effective in getting people to pay their taxes on time.
Nudging with Fun
While much of the conversation focused on nudges to make desired actions easier, Johnsen was also interested in using fun in nudging. Thaler cited a project in Amsterdam that installed piano keys on staircases that played musical notes. This enticed pedestrians to take the stairs instead of the escalator.
Johnsen noted that the CDR’s discovery center & lab Mindworks in downtown Chicago is an example of using fun in behavioral science. With interactive exhibits, visitors gain insights about their decision-making processes and how to use behavioral science to improve their lives. Visitors can also participate in research studies to help advance the field and generate new breakthroughs.
How the COVID Pandemic Changed Behavior
Johnsen asked Thaler about how the pandemic changed his views about decision making. Johnsen personally experienced “decision-fatigue” from all the risk mitigation she had to do. Thaler noted that we were all forced to experiment during these hard times. Family situations and remote work shifted us around the country into unfamiliar situations and new communities. Many businesses also pivoted to remote work out of necessity, a transition which was unlikely to happen at this scale without the global pandemic. While some are returning to the office, this broad experiment with working from home has left an indelible impact on the culture of work.
Behavioral Economics and Introductory Economics Courses
Johnsen posed a question from a high school economics teacher looking to incorporate behavioral economics into his curriculum. Thaler noted that despite the growing popularity and acceptance of behavioral economics, the subject is often omitted from introductory economics courses and textbooks because it complicates the subject for beginners. But Thaler is optimistic behavioral economics will find its way into future texts.
Conclusion & Links
Thank you to Mindworks and WBEZ for hosting this event, and thank you to our speakers, Richard Thaler and Greta Johnsen!