You Can’t Believe What You See (or Hear)

by Stuart Shapiro

Assuming the country isn’t plunged into chaos next week (an assumption I’m still making, but I grow less sure by the day), we will then get back to policy making.  As I teach my students, economics is at the core of policy making.  But economics is undergoing a revolution.  Thirty years ago (I didn’t say it was a fast revolution), a few economists started incorporating psychology and created the field of behavioral economics.  Behavioral economics looks at the way people make decisions and why they might not always follow their self interest.  Here is a great interview, listing some introductory books on behavioral economics here.  An excerpt:

We think we see with our eyes, but the reality is that we largely see with our brains. Our brain is a master at giving us what we expect to see. It’s all about expectation, and when things violate expectation we are just unaware of them. We go around the world with a sense that we pay attention to lots of things. The reality is that we notice much less than we think. And if we notice so much less than we think, what does that mean about our ability to figure out things around us, to learn and improve? It means we have a serious problem. I think this book has done a tremendous job in showing how even in vision, which is such a good system in general, we are poorly tooled to make good decisions.

This has implications for a wide range of policy areas and the interview mentions public health (specifically diet), financial regulation and energy consumption.  For those of you that think that you are completely in control, I suggest you watch the above video (if you haven’t seen it before), count the number of passes the white team makes and then read the interview.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.