Nudge thyself: Economists have more to learn from the natural sciences if they are to claim a realistic model of human behavior
You’ve come to a canteen for lunch: at one end of the counter, you see juicy fat burgers sizzling on a grill and, at the other end, healthy-looking salads. After a little hesitation, you choose the burger. “Cheese and bacon with that?” Well, why not?
Classical economists, perhaps uniquely among members of the human race, would assume you made your decision fully aware of the implications of your actions, that you weighed up those implications and came to the conclusion that, all things considered, the cheese and bacon burger is the better choice. But I for one am rarely so rational and frequently rue my failure to take the healthy option. Considering there are more than a billion people worldwide who are overweight, I’m guessing I’m not alone.
Some economists have realised this and, given the failure of classical models to predict the financial crisis, their young discipline of behavioural economics is now enjoying something of a heyday. They are convinced that accurate models and good policymaking require accurate approximations of real-life human behaviour. They therefore try to take into account our most predictable foibles, such as a tendency to short-term thinking. Economists’ knowledge of these foibles comes from other disciplines - psychology mostly - so they are always playing catch-up. But ever more research on the depths of our irrationality suggests they are still way, way behind.
Take nudging. The idea is that when economists and policymakers understand the ways in which we are predictably irrational, they can tweak policies so that we make the right choices despite ourselves. So, for example, we could make sure the salads are presented at eye-level at the entrance to the canteen, and the burgers are tucked away somewhere at the back.