What is all the fuss about behavorial economics?
Dr Craig Cormick
Have you bumped into anyone use behavioural economics to underpin a science communication strategy, and thought what has sci-comms got to do with economics?
Well let me tell you a story…
You might recall about ten years ago they world went through a serious recession known as the Global Financial Crisis – despite most of the senior economists of the world stating how robust the global system was.
The realization that they had got it wrong was well articulated by Alan Greenspan, former chairman of the US Federal Reserve who told the US Congress that he was “shocked that the markets did not operate according to his lifelong expectations.”Moreover he admitted that he had “made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders.”
His error was in believing that most people and institutions they work for, act in rational ways.
Dan Ariely, professor of Psychology and Behavioral Economics at Duke University in the USA and author of books such as Predictable Irrationality has said, “We are finally beginning to understand that irrationality is the real invisible hand that drives human decision making.”
Put simply, behavioral economics uses psychology and economics, to understand the cognitive biases that prevent us making rational decisions – but more importantly, how those same biases can be used to influence behavior changes.
Two names worth checking out are the Nobel Prize winners, Richard Thaler (author of Nudge) and Daniel Kahneman (author of Thinking, Fast and Slow).
Many governments around the world have established behavioral economic units, including the UK Government’s Cabinet Office, the Singaporean Government and the New South Wales Government’s Department of Premier and Cabinet. And President Barack Obama not only established a Social and Behavioural Sciences Team but issued an executive order instructing federal government agencies to apply behavioral science insights to their programs.
But to my mind the real strength of behavioral economics is the fact it often relies on randomised controlled trials to determine how well an intervention actually works. Imagine if all your science communications work was tested by randomly assigning test subjects to two groups, one to test a proposed communication activity on, and the other as a control group with no intervention.
OMG – that would mean applying scientific principles to science communications! But we’d get a lot better outcomes for what we do.
Here are five key behavioural insights to consider adopting:
1. Power of Free: Yes, we love the word free and it can release large quantities of dopamine into our brains – but only if we believe there was actually a higher cost involved originally, and that thing is now being offered for free.
2. Show what others have done: This is known as social norms. We are social creatures and respond very strongly to conformity and like to behave like we think the majority of people are behaving. An example is how hotel guests were told that the majority of hotel guests reuse their towels, which increases towel reuse.
3. Dominated Alternatives: If there are two choices for your audience, you can steer them towards a preferred option by introducing a third option that frames your preferred option as more desirable. This is usually done by having the new option clearly inferior to the preferred option, but in comparison to the other option is both inferior in some things and superior in others. An example is a Chinese study in which factory workers were provided with spray bottles of sanitizer to clean their hands and workspaces – and told to do it hourly. After measuring usage, the workers were offered another less-convenient choices, a squeeze bottle of sanitizer or a wash basin. The outcome was that use of the spray bottles increased 60% to over 90%.
4. Irrational Value Assessment: If you are told something is very significant, or worth a lot, you are more likely to thing better of it.
5. Decision Paralysis: Having too many options can lead to a lack of decision, and dropping the number of options to about five gets a better result.