Why Behavioral Economics Is Cool, and I’m Not- great piece by Adam Grant in HuffPost – Grant is a behavioral economist and best-selling author, his most famous book – Give and Take: Why Helping Others Drives Our Success
Here are some of my favorite surprising studies. What do they have in common?
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
• 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.”
Why would that be? Let’s consider five possible explanations and the evidence for each:
Hypothesis 1: Behavioral economists are hotter than psychologists.
Survey says: false. In a study of the physical attractiveness of professors in 36 different fields, psychologists were #10 and economists were #30.
Hypothesis 2: Behavioral economists do more interesting work than psychologists.
This one is false too. Exhibit A: Daniel Kahneman, the grandfather of behavioral economics and author of Thinking, Fast and Slow is a psychologist. Despite winning his Nobel Prize in economics, he holds a Ph.D. in psychology and has been a psychology professor for his entire career. Exhibit B: Dan Ariely, a leading scholar in behavioral economics and author of Predictably Irrational, has multiple degrees in psychology and zero in economics.
Hypothesis 3: Behavioral economists do more interesting work than psychologists who aren’t named Dan.