When you’re facing a decision, does the way in which a product is positioned or a question is phrased influence your answer? Proponents of behavioral economics would say yes, resoundingly.
Take this example from a study that examined the rate at which people opted to donate their organs in different countries. In some countries the rate was more than 90 percent, while in other countries it was around 20 percent or less, and there was no in between. Why? Turns out it wasn’t a cultural difference (countries thought to be culturally similar showed widely different behavior), but instead the way the question was worded on the registration form. In countries with high organ donation rates, people are opted in by default and must check a box to opt out. In countries with low rates, people must check a box to donate their organs. Some would say the decision was practically made for the respondents based on how it was positioned.
This is just one example from the field of behavioral economics, which has earned praise and criticism alike. Supporters tout an insightful new way to analyze and predict consumer decisions based on how people really behave; critics say it’s simply a repackaging of consumer behavior theory. Nonetheless, behavioral economics blends psychology and economics to ask questions important for marketing, policy development, and other efforts: why do people so often make decisions that run counter to their own best interests? How do emotions and social forces influence those choices? How do individual decisions ultimately affect the marketplace and society? Most important, behavioral economics offers creative ways to apply these behavioral insights in the hopes of developing more beneficial programs and outcomes.
Join us next Wednesday, June 29 to hear from guest speaker Piyush Tantia, the Executive Director of Ideas42, a non-profit behavioral economics R&D lab housed at Harvard University. As a leader of domestic and international financial design projects, Piyush works closely with leading academics from Harvard, MIT, and Princeton to apply cutting-edge behavioral economics research to improve the design and delivery of financial products with the goal of maximizing social impact. Since early 2009, Piyush has been leading a series of projects applying behavioral insights to foreclosure mitigation.
Click here to RSVP for this event. If you can’t join us on June 29, post your questions as comments here, and we’ll share them with Piyush on Wednesday.
Cartoon from “Behavioral Economics, Strategy and Our Hidden Side” blog