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The Split Personality Of Behavioral Science, Grinch Edition…

December 12th, 2012 · 1 Comment
Behavioral Econ · Buyer Beware

On the first day of my behavioral economics course, I address the question of what sorts of people and organizations are interested in behavioral economics. The list I’ve come up with so far looks something like this:

  • Researchers
  • Policy Makers
  • Marketers
  • Finance Professionals

Obviously, researchers are interested in behavioral economics because it’s their job (and they are generally intellectually curious people). Policy makers are interested in behavioral economics because they want to know what effects policies will have before they enact them. (As a corollary, policy makers also want to understand behavioral responses so that they can be smarter about writing policies in the first place.) Marketers are interested in behavioral economics (and behavioral science in general) so that they can sell people more stuff or encourage particular actions. Finance professionals are interested in behavioral economics (and, even moreso, behavioral finance) because they want to exploit market inefficiencies.

It’s probably not surprising that the natural outcropping of this discussion is to bucket the behavioral economics groupies into two groups- the ones using their powers and knowledge for good, and those using such powers and knowledge for evil. (In this sense, for example, teaching people that extended warranties are financially stupid would be using one’s power for good, and selling people extended warranties would be using one’s power for evil.) The distinction is not always that simple, of course- the marketer who gets consumers to spend more money is doing good for shareholders, and the finance professionals exploiting market inefficiencies are helping to make markets more efficient and prices more “correct.” (In case it’s not obvious, the “bad” part of the financial professionals stems from the fact that they are technically taking profits away from other investors in various ways.)

That said, I think we can all agree that this is using behavioral science for evil:

In these final weeks before Christmas, it may strike you that retailers have gone out of their way to make holiday shopping as unpleasant an experience as possible. The odd truth is that they probably have. And there’s a reason for that: evidence suggests that the less comfortable you are during the seasonal shopping spree, the more money you’ll spend.

Come on, grinches, cut it out. I could take the Jon Stewart approach and tell you to “be a f**king person,” or I could, as an economist, point out your behavior is socially ineff…no, it’s the holidays, so I’m just going to go with “be a f**king person.” Maybe it’s because I’m softening in my old age, but maybe it’s because my brain hurts from trying to model this behavior- increasing the cost of an activity is supposed to make people do less of it, but this doesn’t really count as an externality either since it’s affecting those involved in the transactions rather than a third party. Perhaps I’ll use behavioral economics for good and try to figure this one out.

Tags: Behavioral Econ · Buyer Beware

1 response so far ↓

  • 1 Marie // Dec 12, 2012 at 8:16 pm

    Coping with stress depletes willpower, and therefore diminishes ability to act mindfully. Also time constraints diminish ability to act mindfully.
    Impulsivity could lead to more consumption if pleasure of buying now, pain of paying later…

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