Sign up FAST! Login

Why Behavioral Economics is Cool, and I’m Not - Adam Grant

Stashed in: #TED, LinkedIn, Awesome, Psychology!, Give and Take, @gladwell, Freakonomics, Work & Productivity (Takin' Care of Bidness)

To save this post, select a stash from drop-down menu or type in a new one:

Btw stash every freakonomics / behavioral economics / organizational psychology article you like. 

I cannot get enough of this subject matter!

Thanks for reminding me that I wanted to stash this!  If only my memory were as long as the day . . .

You and me both, Seth. What about this article made you want to stash it?

What's in a name?

Here are some of my favorite surprising studies. What do they have in common?

  • People are more likely to buy jam when they’re presented with 6 flavors than 24.
  • After inspecting a house, real estate agents thought it was $14,000 more valuable when the seller listed it at $149,900 than $119,900.
  • When children play a fun game and then get rewarded for it, they lose interest in playing the game once the rewards are gone.
  • People conserve more energy when they see their neighbors’ consumption rates.
  • If you flip a coin six times, people think Heads-Heads-Heads-Tails-Tails-Tails is less likely than Heads-Tails-Tails-Heads-Heads-Tails, even though the two are equally likely.
  • Managers underestimate the intrinsic motivation of their employees.

They’ve all appeared in the media as research done by behavioral economists, when in fact they were done by psychologists.*

This is a common mistake. As one Nobel Laureate in economics observes: “When it comes to policy making, applications of social or cognitive psychology are now routinely labeled behavioral economics.”

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.”

There's a fine line between economics and psychology sometimes. They're both social sciences.

I think of what he does as more Freakonomics-y. Social scientific observations. 

* Here are links to the studies mentioned above: choice overload in jam purchasing, social proof in energy consumption, extrinsic rewards undermining intrinsic motivation in game play, anchoring with listing prices in real estate, the representativeness heuristic in a coin toss, and managers underestimating intrinsic motivation.

Hypothesis 3: behavioral economists do more interesting work than psychologists who aren’t named Dan.

False. Yes, great books like Freakonomics and Nudge are by economists, but the majority of bestselling social science books are about psychology. Most of the studies covered in Malcolm Gladwell’s books are by psychologists (he writes more about sociology than economics too). And of the 20 most-viewed TED talks, none are by economists or about economics. By comparison, three of the top talks are by psychologists (Amy Cuddy on body language, Dan Gilbert on happiness, Shawn Achor on happiness), three more directly reference psychological research (Dan Pink on motivation, Susan Cain on introverts, Pamela Meyer on lie detection), and several others deal with psychological topics (including Ken Robinson on creativity in schools, Simon Sinek on leadership and Brene Brown on vulnerability).

Hypothesis 4: behavioral economics sounds less obvious than psychology.

True. Economics is the science of efficiently allocating scarce resources, and it generates lots of clever, unexpected solutions to problems. For example, who would have ever thought to stop subway robberies by guarding turnstiles?

Psychology, on the other hand, seems like common sense. By virtue of owning a brain, we’re all experts in psychology. Why do we need psychologists to teach us the obvious? Here are three ideas from psychology that aren’t exactly earth-shattering:

  • If you want someone to say yes to a small request, giving a bad reason is worse than no reason at all.
  • If you want to be happier, counting more blessings is better than few.
  • If you’re angry, venting is a good way to calm down.

Duh. But there’s a catch: all three findings are the opposite of what psychologists have discovered.

Ellen Langer and her colleagues found that if you ask to cut in front of people in line at a copy machine “because I’m in a rush,” 94% say yes. If you give no reason, only 60% say yes. But if you give a bogus reason, “because I have to make copies,” 93% say yes. The use of a logical “because” is enough to trigger a mindless yes, even though the information that follows provides no new information.

Research led by Norbert Schwarz suggests that when you name three good things about your life, it’s easy to think of, and you use that as a clue that your life is pretty good. But if you have to name a dozen good things about your life, you’ll have to think harder, and you might draw the conclusion that your life is not quite as great.

And studies led by Brad Bushman show that venting makes us angrier and more aggressive. When angry people were randomly assigned to hit a punching bag, they became angrier than people who were distracted or did nothing at all—and they were more likely to deliver loud, unpleasant blasts of noise to the person who made them mad.

Psychology isn’t as straightforward as it seems. As sociologist Duncan Watts points out in his book, everything seems obvious once you know the answer. (For more examples, seeThe 50 Great Myths of Popular Psychology.)

You May Also Like: