Questioning Behavioral Economics

It is such a big story that it merited two extended articles in two major publications. Noam Scheiber wrote about the downfall of Harvard Business School professor and leading behavioral economist, Francesca Gino. He and New Yorker writer Gideon Lewis-Kraus also explained the problems with the work of another famed behavioral economist, Dan Ariely of Duke University.

Both are accused of skewing their data in order to prove some bizarre theory they concocted about human motivation. For now only Gino has been relieved of her duties, but people are concerned about some of the research conducted by Ariely.

Since the articles in question do an excellent job of laying out the issues, I will not rehash them. The more important issue is what this so-called science of behavioral economics is all about.

On the surface it seems like a perfectly respectable discipline. It involves the study of human motivation and human decision-making. And yet, more importantly, it involves the manipulation of minds in order to induce people to make better decisions.

Of course, the issue then becomes: who decides what the best decision is?

Scheiber explains:

The paper found that asking people to attest to their truthfulness at the top of a tax or insurance form, rather than at the bottom, made their responses more accurate because it supposedly activated their ethical instincts before they provided information.

And also,

Many behavioral scientists believe that, once we better understand how humans make decisions, we can find relatively simple techniques to, say, help them lose weight (by moving healthy foods closer to the front of a buffet) or become more generous (automatically enrolling people in organ donor programs).

Of course, there is something ignoble about trying to learn how to manipulate minds, without people knowing their minds are being manipulated. Naturally, anyone who is selling mechanized widgets will find this new science fascinating, but how well does it hold up to scrutiny?

The issue becomes whether or not human beings make rational decisions. Or else, do people really act in their self-interest. Apparently, rationality involves acting in one's self-interest, as opposed, for example, to acting altruistically in a group's interests:

The book helped introduce mainstream audiences to the quirks of human reasoning that economists traditionally ignored because they assumed people act in their self-interest. Behavioral science seemed to offer easy fixes for nonrational acts, such as our tendency to save too little or put off medical visits.

Gideon Lewis-Kraus summarizes the theoretical basis for the discipline:

Despite a good deal of readily available evidence to the contrary, neoclassical economics took it for granted that humans were rational. Kahneman and Tversky found flaws in this assumption, and built a compendium of our cognitive biases. We rely disproportionately on information that is easily retrieved: a recent news article about a shark attack seems much more relevant than statistics about how rarely such attacks actually occur. 

Again, the researchers choose what appears to be the right thing and assume that they can manipulate minds into making the right decisions. 

Of course, to take an obvious counter-example, when you are playing chess, how do you factor in your ability or inability to play the game, your focus and concentration, your opponent’s skill and so on. Surely, a nudge from a behavioral economist is not going to improve your game as much as practice and study will.

True enough, some moves are better than others, but still, you need to be a very good chess player to know the difference. And, what happens when you are calculating the risk involved in one or another moves.

Besides, can you make the right move or even a good move, and still lose the game.

And then there is this. Francesca Gino published a book about how best to break rules. 

In 2018, she published her own mass-market book, “Rebel Talent: Why It Pays to Break the Rules at Work and in Life.” “Rebels are people who break rules that should be broken,” Dr. Gino told NPR, summarizing her thesis. “It creates positive change,” she added.

I have not read the book, but surely when playing chess you are not going to gain anything by breaking the rules. The more important issue, as argued by Wittgenstein and Kripke, involves following rules. If you systematically break rules you will not be creating positive change. You will be alienating yourself from other people.

When you count from 1 to 100 you are following a rule. Is there any virtue in breaking the rule? When you show up late for an appointment or eat with your fingers you are breaking rules of social decorum. What advantage do you gain by doing so? If you follow the rules of English grammar and syntax, you are speaking intelligibly. But you are also showing that you belong to society at a certain social strata. Does it make any sense to encourage people to use bad grammar in order to make a political or ideological point?

Gideon Lewis-Kraus offers this example:

Take, for example, cheating. If people are utility-maximizing agents, they will fleece as much as they can get away with. Ariely believed, to the contrary, that a potential cheater has to balance two conflicting desires: the urge to max out his gains and the need to see himself as a good person. In experiments, Ariely found that most people cheat when given the opportunity—but just a little. Ariely, who does not shy from cutesiness, called this the “fudge factor.” In turn, he proposed, people might just need to be reminded that they aspire to be decent. 

Ariely notwithstanding the decision not to cheat has little to do with a desire to see oneself as a good person. At the least, it involves a duty and responsibility to oneself and to others. Remaining in good standing in one’s social group, avoiding ostracism, is certainly more important than how you feel about yourself.

Gideon Lewis-Kraus summarizes the doubt that has now overcome the field:

In the past few years, some eminent behavioral scientists have come to regret their participation in the fantasy that kitschy modifications of individual behavior will repair the world.

Worse yet, how often are we really led astray by incomplete information? How many times do we make decisions on the basis of intuition? What if we do not have the time to evaluate all the options?

If human beings do not make rational decisions, how does it happen that society or business is organized and constructed? Rational decision-making would be meaningless if we could not act irrationally. Similarly, irrational decisions or just plain bad decisions would not be discernible if we did not know the right decisions.

Moreover, behavioral economics seems to believe that we are led around by our desires. But, do you always do what you want to do? Your duties to those who are part of your social network are not desires. You might feel contented for doing the right thing, for following the rules of your workplace or even your social club. Does this mean that you did not feel a temptation to do the wrong thing? And if you did not do the wrong thing, does that make you rational or irrational?

What if we follow rules and do the right thing because we are social beings, and because we wish to retain our social network, for ourselves and for our friends and family and colleagues. 

When it comes to telling the truth, sometimes we do not tell the truth because it would damage social connections. People who tell the truth are often punished for doing so. They are considered to be troublemakers and often have problems keeping or finding jobs.

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