Ethics of behavioral economics: Nudges or manipulation?

The field of behavior economics includes the study of how and why people make the decisions they do and consequently, it’s the study of how to change people’s decisions to push them in different directions. Governments have used these techniques and findings to promote positive behaviors like not littering and not smoking but also to increase the number of people paying their taxes. Private companies have used these techniques to increase the sales of their products and services. People employing these techniques often say they provide a “nudge.” At what point do these nudges become manipulation? Does it matter if the behavior being promoted is one we agree is positive like quitting smoking? How does the use of language affect our perception of ideas and things?

What is also interesting about this field is that some traditional economists resent the term “behavioral economics” and don’t consider it to be part of their field. They were further annoyed when a behavioral economist and self identified psychologist, Daniel Kahneman, won the Nobel Prize for economics.

Below are a couple of articles about this field.

1. Manipulate Me: The Booming Business in Behavioral Finance

“Many behavioral interventions work, whether at reducing litter and power usage or boosting savings rates and organ donations. Yet these successes aren’t the whole story. Even after rigorous experimentation and data analysis, the best-intentioned nudges can fall flat or backfire. Some may be behavioral band-aids that don’t address deeper structural problems such as stagnating wages. Nevertheless, consumers have jumped on the bandwagon, eager to be manipulated into the best version of themselves, and businesses are rushing to meet the demand.”

http://www.bloomberg.com/news/articles/2014-04-07/manipulate-me-the-booming-business-in-behavioral-finance

2. What was I thinking?

The latest reasoning about our irrational ways

“Why do people do things like this? From the perspective of neoclassical economics, self-punishing decisions are difficult to explain. Rational calculators are supposed to consider their options, then pick the one that maximizes the benefit to them. Yet actual economic life, as opposed to the theoretical version, is full of miscalculations, from the gallon jar of mayonnaise purchased at spectacular savings to the billions of dollars Americans will spend this year to service their credit-card debt. The real mystery, it could be argued, isn’t why we make so many poor economic choices but why we persist in accepting economic theory.”

http://www.newyorker.com/magazine/2008/02/25/what-was-i-thinking

3. Why Behavioral Economics Is Cool, and I’m Not

“It happens to me regularly: I’m an organizational psychologist, but I get introduced at least once a week as a behavioral economist. The first time this happened before a speech, I attempted to set the record straight, telling the executive that all of my degrees were in psychology. His response: ‘Your work sounds cooler if I call you a behavioral economist.'”

http://www.huffingtonpost.com/adam-grant/why-behavioral-economics_b_5491960.html

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