Last week, Richard Thaler, one of the founding fathers of behavioral economics, won the Nobel Prize in Economics Sciences (read the Nobel announcement here). Thaler, the Charles R. Walgreen Distinguished Servcie Professor of Behavioral Science and Economics at the University of Chicago, was awarded the Nobel Prize for his work on bridging economics with psychology, which has now become the increasingly popular field of behavioral economics. This is exciting news for behavioral economists and scientists across the world, and of course for the community of faculty and students at Harvard who use principles from Thaler’s work to improve policy issues for the public good.
The Harvard Behavioral Insights Group (BIG) was launched in 2013 and is co-directed by HKS Professor of Public Policy Iris Bohnet and the HBS Jesse Isidor Straus Professor of Business Administration, Max Bazerman. Inspired by recent books including Nudge by Richard Thaler and Cass Sunstein, BIG brings together Harvard’s outstanding group of decision research scholars, behavioral economists, and other behavioral scientists to focus their energies on improving how decisions are made, both by leaders, and by individuals. BIG is driven by the belief that improving the quality of our leaders’ decisions is a core lever we possess to improve the world.
Since 2013, the interest in behavioral economics among the Harvard population has surged and now serves 40 Harvard faculty and over 1000 students who apply behavioral insights across different policy issues. The student arm of BIG is entitled Behavioral Insight Student Group, and hosts weekly events with behavioral insights experts, career panels, and hands-on research workshops.
BIG hosted Thaler and Sunstein for a panel on ‘“Nudging” Policy: Behavioral Economics in the Public Square’, held at the JFK Jr. Forum and moderated by Bazerman and Nava Ashraf back in 2013 (you can view the full video recording here).
This week, BISG’s Communications Chair David Reiff (MPP/MBA, ‘20) sat down with Harvard BIG’s Sunstein (co-author of Nudge) and close friend of Thaler’s) and Bazerman to get their reflections on the award, the implications for the field, and where we go from here.
Read the Q&A below:
How did you get the news, and what was the reaction?
Sunstein: He had the good judgment not to wake me up at 4:00 a.m., and so I heard around 6:30 a.m., when I woke up, and of course I called him immediately. He was of course honored and I was thrilled!
Bazerman: Great news and well deserved. There was not much surprise, as it was clear to many that Thaler was worthy of the prize, and it was primarily an issue of what year.
How has Thaler's work influenced the way you think about behavioral science? What contribution of his has most impacted your work in behavioral ethics specifically?
Bazerman: Behavioral decision research and behavioral economics has helped us identify systematic and predictable mistakes that even smart humans tend to make. The “systematic and predictable” part is important, as this provides the hint of how to nudge people forward. Kahneman, Tversky, and Thaler are certainly the leaders at starting the identification of these mistakes. Applied to ethics, their approach helps me categorize ways in which people act badly that they would change with greater reflection. I am thoroughly greater for this lens of analysis.
What do you think have been the most important developments in behavioral economics since the inception of Nudge?
Sunstein: Scarcity, by Sendhil Mullainathan and Eldar Shafir. The book adds something important and fresh, which is an understanding of the role of cognitive scarcity in people's lives, with an emphasis on the poor.
Thaler’s Nobel win seems to be an accomplishment for the field of behavioral economics as a whole. Now that behavioral economics has been established as an important field by which policy can be improved, what policy areas should "nudgers" be tackling next? What is the future of the field?
Bazerman: I never trust people over 40 (ok 45, need to make room for a bit of aging by our young stars) with such questions about the future. The young stars are more likely to know the answers. So, ask [Todd] Rogers, [Francesca] Gino, [Mike] Norton, [Katherine] Coffman, [Mike] Luca, [John] Beshears, [Leslie] John, [Alison] Brooks and [Julia] Minson – I trust their answers over mine.
Sunstein: This is hard to predict – academic work goes in all sorts of surprising directions. In terms of policy, poverty, development, mental illness, and chronic pain are high priorities. I would like to see a lot more work on those four topics. My favorite things I confess are conceptual breakthroughs – Thaler gave us a bunch and it would be great to see more. "Comparison friction," also from Sendhil Mullainathan, is a good one, and a lot could be done with it. (For details you have to read the paper!)
“The Making of Richard Thaler’s Economics Nobel,” The New Yorker
“The Rise of Behavioral Economics and its Impact on Organizations,” Harvard Business Review (authored by BIG’s Francesca Gino)