By Noah Peters.
Society’s declining trust in science in general and economics in particular is a much debated topic. Martin Wolf’s recent commentary for the Institute of New Economic Thinking (INET) is only one way of addressing the conundrum. This blog post draws on two prominent contentions underpinning the obscure notion of distrust in economics. Firstly, economists (allegedly) live in their ivory towers surrounded by mathematical formulas no outsider would even vaguely understand. Secondly, they are accused of not being able to adequately forecast crises, let alone fend them off.
One increasingly influential sub-discipline in economics tries to overhaul these stereotypes. Stemming from psychology, behavioural economics shows that humans are multi-faceted, empathetic and guided by values and social surroundings. For readers not familiar with economics, this finding might not be a major surprise. But it goes against the grain of long-standing economic traditions emphasising people’s pursuit of profit maximisation. Acknowledging people’s genuine driving forces and behavioural patterns counteracts the first contention I presented earlier: economists’ penchant for technical abstractions of human action.
Moreover, behavioural economics and behaviourally informed policy interventions address everyday problems – retirement savings, administrative procedures or identifying the healthiest product on a supermarket shelf. Behavioural policy interventions aim at improving the lives of ordinary people. Economic and financial crises unequivocally affect the lives of everyone, from investment bankers to bakers. But loosening people’s daily constraints is as important and contributes to the bigger picture. This is what behavioural policy does.
Consequently, those interventions and their economic foundations are relatable. I argue that this relatedness to the real world is pivotal in regaining societal trust and convincing citizens of the value that economic theory can add.
While this demand is not new and maybe trivial, it is worth stressing over and over again. And especially behavioural economics got the message. Unsurprisingly, key topics for policy-makers are sustainability and public health. Behavioural interventions address these challenges from an individual-level, demand-side perspective. By inquiring how people really judge and decide (using experiments and investigating people’s motivations), the overarching challenges of the 21st century can be traced to the consumer level. This way, we can elucidate how every single person can make a difference. Today’s urgencies become vivid and tangible.
A couple of examples in the domain of food choice shall underpin this connection of behavioural economic theory and everyday applications. A supermarket, for example, constitutes the perfect playground for behavioural scientists. Traffic-light labels indicating how healthy a certain product is draw on the plain fact that simplifications can enhance people’s decisions. Likewise, plate size can affect how much people eat. Restaurant menu design could steer which option customers choose. One additional strategy are default options, e.g. vegetarian snacks automatically ordered for meetings if not otherwise changed for non-vegetarian alternatives. This feature is informed by the fact that people prefer the status-quo and are sometimes too lazy to make simple changes.
This list is not exhaustive, and the interventions presented above are widely discussed in academia and rather trivial. Thus, every serious scholar would automatically defend the originality of her ideas. Others would go even further and completely demonise any form of real-world application.
I contend, however, that the frivolous essence of many behavioural interventions explains their efficacy and acclaim. Psychological underpinnings inform policy interventions in a way that relates to people’s everyday lives thereby addressing the questions of our time.
But it’s not entirely rosy for behavioural economics either. Critics contend that consumers – citizens (!) – are manipulated and deprived of their own capacity to judge. There are compelling reasons why this notion is short-sighted, though. Thus, behavioural scientists must establish guidelines ensuring their legitimate intentions and communicate their toolbox transparently. And of course: mathematics and technical tools are invaluable instruments for the empirical sciences; they are the very departure point to extrapolate the world we live in.
The combination of scientific rigour, tangible applications, and sincere motivations can help restore societal trust. Scientists who are successful in applying and communicating this trinity, can evade the curse of post-truth sentiments and latent hostility to experts.
About the Author
Noah is a visiting research assistant to the Department of Management, Society and Communication (MSC). He studies sociology, politics and economics at Zeppelin University, Germany. In his research he focuses on behavioural economics and policy applications, as well as economic and urban sociology. Partaking in an exchange programme between Copenhagen Business School and Zeppelin University, Noah supports current research at MSC’s Consumer and Behavioral Insights Group (CBIG). Connect on LinkedIn or ResearchGate if you are so inclined.