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On the whole, I agree with Uwe. But from my own experiences, economics, when properly understood and used well, is the most intellectually rigorous of the social sciences (that said, the most intellectually rigorous among my friends are often not economists, so I've created my own paradox). Like anything I suppose, effective criticism of economics best comes from those who understand it adequately, which is one reason, I think, why the whole nudge agenda has become so weak. Another reason is that it is at least questionable that democratically elected governments should nudge its citizenry, if the citizens aren't harming anyone. I have a paper on this forthcoming in the Journal of Social Policy. Happy to share with those interested. Hope a good weekend for all. Adam -----Original Message----- From: "Uwe E. Reinhardt" <[log in to unmask]> Sender: Anglo-American Health Policy Network <[log in to unmask]> Date: Fri, 12 Apr 2013 17:10:39 To: <[log in to unmask]> Reply-To: "Uwe E. Reinhardt" <[log in to unmask]> Subject: Re: Nudge and money This has been an interesting exchange, so far, and I hope it will continue, so that I may learn from it. If, after 20 years of working in the field of behavioral economics, Adam still "hasn't mastered it by any stretch of the imagination," imagine the plight of a little country economist from rural New Jersey. When asked at dinner parties what behavioral economics is, I try to get off the hook by explaining that one can think of behavioral economics as an academic seminar to which psychologists and other disciplines have been invited and at which at least some economists discard their century-old hauteur to listen to insights from other disciplines. So a kindly psychologist might explain to us that people actually do not cope with uncertainty in the elegant and simple way imagined by the von-Neumann-Morgenstern algorithm. Or we learn that the reaction of people to probabilities depends strongly on how that probability is described to them: "out of 100 patients undergoing this procedure, 4 die" vs. "out of 100 patients undergoing this procedure, 96 survive." We learn that "more choice" or "more options" is not necessarily better, something some standard economists have trouble grasping. Thus educated, behavioral theorists then think of ways to structure the context in which decisions are made in a way that leads to choices that are somehow desired by the structurer. At least that is what I think of as the normative branch of behavioral economics. Viewed in this way, behavioral economics is more than just an attempt to shore up standard economic analysis. It is an attempt to build models of systematic human behavior based on axioms and hypotheses that come closer to life here on earth rather than to life on planet Econ, as Tsung-Mei Cheng had put it so nicely at a talk at iHEA Toronto in the attached slide. It is an attempt to bring models of economic behavior back to earth from outer space, to where mathematical standard economics had blasted it. Best, Uwe -----Original Message----- From: Anglo-American Health Policy Network [mailto:[log in to unmask]] On Behalf Of Michael Gusmano Sent: Friday, April 12, 2013 12:25 PM To: [log in to unmask] Subject: Re: Nudge and money Thanks for prompting this exchange! I appreciate Adam's work on this topic and think it is wonderful that you are discussing the normative implications of nudge strategies in particular, and behavioral economics generally. I have often had the same reaction as Tom regarding "present bias" and so-called hyper-discounting. If the extent to which we discount (at an individual or policy level) is value choice, the democratic theorist in me would like to encourage an explicit public deliberation about this. Indeed, if nudge strategies are supposed to work at a subconscious level, I think it is particularly important at the policy level to have debates about the direction we are pushing. As Tom suggests, the application of some nudge strategies seem to define behavior that deviates from the assumptions of mainstream economics as a problem that needs to be solved. Michael ________________________________________ From: Anglo-American Health Policy Network [[log in to unmask]] on behalf of Adam Oliver [[log in to unmask]] Sent: Friday, April 12, 2013 9:21 AM To: [log in to unmask] Subject: Re: Nudge and money Dear Tom, Behavioural economists fall into many camps, which I agree is messy, but there you go. I think you have summarised the position of one camp - that is, they identify systematic patterns of behaviour that deviate from the standard model, and consider these to be of descriptive rather than normative import (probably most behavioural economists sit here). Another camp believe that if the patterns are systematic, there must be something deliberate about them and therefore how can we say they are non-normative (i.e. that people should not behave in these ways). We can say that they should not behave in these ways if people ought to be expected utility maximisers, but many behavioural economists, including me, do not believe that people necessarily ought to be EU maximisers in all circumstances. Another camp of behavioural economists recognise that the systematic patterns exist, but feel that outcomes maximisation of any sort is too strong a position to take. They'd rather just maximise opportunity of choice, warts (i.e. anomalies) an' all. A fundamental problem, as I see it, with the area of nudge and behavioural economics (loosely defined) is that many people who see themselves as having expertise in this area, don't. I've been studying behavioural economics since 1990, and I haven't mastered it by any stretch of the imagination. You pose good questions, though. Best, Adam -----Original Message----- From: Anglo-American Health Policy Network [mailto:[log in to unmask]] On Behalf Of Tom Foubister Sent: 12 April 2013 14:09 To: [log in to unmask] Subject: Re: Nudge and money Adam Suppose that mainstream economics rests on a model of individual behaviour which fails to represent accurately, even adequately, how people actually behave. I believe this is a presupposition of behavioural economics. Behavioural economics, in contrast, takes how people actually behave (using empirical observation and experiment to do so) as its practical starting point. Like mainstream economics, behavioural economics rests on a pretty stable model of the economic individual - attributes such as present bias and so on being constants here. Being economics it has to. What I'm wondering is this: The way behavioural economics structures the economic individual is essentially as a series of deviations from the mainstream economics model, a series of 'falling-shorts', or errors - all negative attributes given positive defining force by behavioural economics, and for whose positive and enabling equivalents we have the mainstream model to thank. So behavioural economics, at bottom, starts from, shares, reproduces (in a shadow kind of way) and ultimately reinforces the mainstream model. It certainly doesn't challenge it as a normative model. The key difference is this: for mainstream economics the model reflects the reality (even if individual economists don't quite fully believe that); for policy-oriented behavioural economics reality needs to be helped to better reflect the mainstream model. Perhaps the term 'present bias' itself says all that needs to be said. To call it present 'bias' is automatically to consider it a flaw relative to the un-flawed mainstream model, a model whose value is in consequence affirmed. But I wonder if, for instance, a Buddhist would see the 'bias' in it, or an Epicurean, or other worldviews. Are there any implications to this? Probably not, it's just a thought. But I think we need to think carefully about the claim - implicit or stated - behavioural economics makes to present a challenge to the mainstream economics model; and we should also fully agree with you that mainstream economists really oughtn't to be dismissive of behavioural economics. Tom -----Original Message----- From: "Oliver,AJ" <[log in to unmask]> Sender: Anglo-American Health Policy Network <[log in to unmask]> Date: Fri, 12 Apr 2013 11:32:36 To: <[log in to unmask]> Reply-To: "Oliver,AJ" <[log in to unmask]> Subject: Nudge and money Hi, If you are interested in the subject of paying people to make healthier choices, I've written a very short blog on the subject, relating it to nudge: http://blogs.lse.ac.uk/healthandsocialcare/2013/04/12/nudging-with-money / Best, Adam Please access the attached hyperlink for an important electronic communications disclaimer: http://lse.ac.uk/emailDisclaimer Please access the attached hyperlink for an important electronic communications disclaimer: http://lse.ac.uk/emailDisclaimer Please access the attached hyperlink for an important electronic communications disclaimer: http://lse.ac.uk/emailDisclaimer