Must-Read: Noah Smith: We’re All Smart. And Dumb. Sometimes
: We’re All Smart. And Dumb. Sometimes: “The good criticism of behavioral econ is that it’s very hard to go from the lab to the real world…
…The bad one [is] people are way, way too afraid of the soft paternalism of nudges…. William Easterly… expressed this fear when he tweeted: ‘Behavioral econ [Thaler] says we are too dumb to fix our own mistakes but smart enough to fix everyone else’s[.]’ Easterly… mischaracterized behavioral economics. Behavioral econ isn’t about smart people knowing what’s best for dumb people. It’s about all people being smart some of the time and dumb at other times. Or strong-willed some of the time and weak-willed at other times…. Critics of soft paternalism should realize that people are already being nudged all the time, and not by government. The true masters of behavioral economics are marketers in the private sector… and have never had any compunction about using it to take your money.
Ever wonder why prices in stores are $9.99 instead of $10? Behavioral economics. How about sales and discounts? Just raise the base price and treat the real price as a discount, and behavioral economics will make people more eager to buy. That yogurt that advertises itself as fat-free? Check out how many grams of sugar it has. And so on. Marketing is by far the biggest application of behavioral economics, it’s perfectly legal and it’s already everywhere. You are being nudged 24/7. If you stop to think about it, it’s ludicrous that behavioral econ skeptics are up in arms about government nudges, but blithely unconcerned about corporate nudges. But stopping to think about things is something we rarely do. And that’s why behavioral economics is important.