NASEM Hosts Workshop on Psychology and Behavioral Economics

August 18, 2022

The Consensus Committee of the National Academies (NASEM) hosted the Workshop on Behavioral Economics: Exploring Applications & Research Methods on July 18-19 (see the video recording and materials here). The event sought to identify opportunities to apply behavioral economics and psychology to public policy on issues including chronic illness, public health, climate change, incarceration, and education. The committee examined successes and shortcomings in the implementation of behavioral economics and discussed recommendations for further progress. To read about the Committee’s first Behavioral Economics to Policy meeting, click here

Nobel Prize winner Richard Thaler presented on the importance of considering all factors –even the seemingly irrelevant– when designing effective public policy. Using the Affordable Care Act (ACA) as an example, he explained how entry level psychology and economics often emphasize reducing seemingly extraneous information, which would lead to the conclusion that the ACA bill would only work if it included mandates. In the real world, however, psychological research has shown that individuals make rational choices and mandates are not necessary.

Asa Lofgren, from the University of Buttenheim, spoke on the role of behavioral economics in implementing environmental policy. She presented that the effects of nudges (positive reinforcement and indirect suggestions as tools to modify behavior) in this sphere have mixed outcomes and the efficacy can be dependent on the type and scope of intervention. Despite the difficulties in implementation, there is significant potential for behavioral interventions to be incorporated in policy interventions. The best nudges would target choices that do not involve strong, ingrained habits or decisions deemed very important. 

Ben Castleman, from the University of Virginia, spoke about behavioral economics in higher education as a tool to help students follow through with their intentions and pursue beneficial resources and pathways for their skills and futures. Castleman presented the success of tax professionals providing FAFSA (Free Application for Federal Student Aid) help to families during tax prep. Software has also been designed to pre-populate information into the FAFSA application from tax information. These efforts to simplify tasks can facilitate a more successful transition into higher education. Innovations currently in development include machine-learning to provide guidance, incentives for key steps in education, and strengthening engagement at broad-access institutions. 

Aurelie Ouss, from the University of Pennsylvania, also spoke to the use of behavioral economics in reducing criminal justice disparities. She highlighted that many existing policies ignore the fact that people respond to incentives. Through the lens of behavioral economics, it is important to understand that deliberate cognition is necessary to make lawful decisions. Ouss battled the notion that individuals actively choose to commit crimes because often there is not one clear moment of choice. She suggested that policy would be strengthened by considering the full breadth of factors that go into decision making. The synergy of behavioral science, psychology, and renewed policies is the way to regenerate the criminal justice system. 

Jolene Pomeroy and Joe Zhao, from the City of Mesa Nudge Team, shared examples of their work within municipal government and highlighted both positive and negative results. A successful study showed that when compared to a normal library card renewal email, adding in the number of people who had registered and a recommended deadline for the date of renewal increased the amount of interaction with the email by 18 percent. A study which did not yield expected results involved the redesign of pamphlets encouraging voter registration. The team assumed that adding color, emojis, and more vibrant graphic design would increase registration. The result was in fact the opposite, as these changes diverged from individual’s expectations for what a formal pamphlet should look like. Pomeroy and Zhao concluded that nudges must account for the biases, culture, and expectations of the target population.

David Yokum, from Brown University, argued that behavioral economics and nudges are important, but only a small part of the work needed to advance research in psychology and public policy. He highlighted that it is crucial to use a wide variety of interventions in studies to see results. Yokum introduced an asymmetry between the policy recommendations and their ultimate implementation. Narrowing this gap will create faster and more effective feedback that will benefit the research. Professor Yokum concluded that behavioral economics is “riding a much larger wave of momentum” for exploration; applying too much attention to only this aspect of research is overall detrimental to the field of research as a whole, but nudges should be valued as a tool. 

To learn more about future National Academies events, click here.