Utilizing Behavioral Insights (without Romance): An Inquiry into the Choice Architecture of Public Decision-Making

By Smith, Adam C. | Missouri Law Review, Summer 2017 | Go to article overview

Utilizing Behavioral Insights (without Romance): An Inquiry into the Choice Architecture of Public Decision-Making


Smith, Adam C., Missouri Law Review


I. INTRODUCTION

It should be no surprise to learn that humans behave in ways that are far from optimal. Be it from poor planning or untoward circumstance, we rarely, if ever, experience the idyllic fantasy of optimality in our various day-to-day activities. Or as David Byrne of the Talking Heads once sang:

Heaven, Heaven is a place
A place where nothing
Nothing ever happens. (1)

Economists have spent decades investigating just how day-to-day choices can be improved. The older welfare economics research program, for example, sought to improve competition in the marketplace by correcting perceived market failures, with the intended result of reducing prices and improving product quality. (2) The Chicago school of economics, on the other hand, tended to emphasize the role of fiscal policy and regulation in creating bad incentives and misallocating market resources. (3) Smaller and smarter regulation could therefore unleash dormant market potential. Despite their different orientations, both of these approaches rely on the canons of neoclassical price theory and highlight institutional factors as the source of observed shortcomings. Individuals choose optimally within the constraints produced by prevailing institutions, and thus undesirable outcomes could easily be avoided by "getting the rules right."

In a different vein, starting with Nobel laureate Daniel Kahneman and his co-author Amos Tversky, behavioral economics has exposed dozens of behavioral "anomalies" through extensive laboratory investigation of behavior. (4) These anomalies constitute observed behavioral deviations from the predictions of neoclassical economic theory, and behavioral economists have sought to explain the sources of such anomalous choices by identifying and cataloging a variety of cognitive limitations and psychological biases. Building on these findings, behavioral economists have even begun to export their psychological findings into policy prescriptions. (5) This research program--led by such luminaries as Richard Thaler and Cass Sunstein and known as behavioral law and economics--seeks to apply the insights gleaned from studies of human behavior to improve existing institutions by designing rules to compensate for (or take advantage of) people's various biases. (6) Given that observed choices are inconsistent with neoclassical theory, behavioral economists argue that "getting the rules right" with respect to neoclassical decision-makers will be insufficient to generate desirable outcomes. If people are not rational to begin with, in the neoclassical sense of the word, then solutions designed for rational agents will not necessarily lead to desired outcomes.

Thaler et al. provide a cogent outline of how we, as observers, might conceive of this dilemma. (7) Their phrase "choice architecture" encapsulates the notion that choice itself is affected by the context in which it is made. Providing one set of incentives elicits certain responses, even when the actor is unaware of how they are being affected. Developing better choice architecture, defined as that which allows for optimal decision-making, could potentially improve choice outcomes. While this choice architecture can be manipulated through a variety of means, it is often policy prescription through the public sector that is proposed by behavioral economists.

This has led to the creation of several public agencies, such as the Behavioural Insights Team (8) in the United Kingdom and the Consumer Financial Protection Bureau (9) in the United States. Furthermore, an executive order in September 2015 signed by President Obama created a new Social and Behavioral Science Team mandated with the task of combing regulatory and other public activities for opportunities to improve choice architecture. (10) Clearly, public policy guided by the insights of behavioral economics is on the rise. (11)

But as Boettke et al. indicate, this framework puts the cart before the horse in prescribing policy purely due to anomalous behavior. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Utilizing Behavioral Insights (without Romance): An Inquiry into the Choice Architecture of Public Decision-Making
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.