In 1974 an article appeared in Science magazine with the dry-sounding title “Judgment Under Uncertainty: Heuristics and Biases” by a pair of psychologists who were not well known outside their discipline of decision theory. In it Amos Tversky and Daniel Kahneman introduced the world to Prospect Theory, which mapped out how humans actually behave when faced with decisions about gains and losses, in contrast to how economists assumed that people behave. Prospect Theory turned Economics on its head by demonstrating through a series of ingenious experiments that people are much more concerned with losses than they are with gains, and that framing a choice from one perspective or the other will result in decisions that are exactly the opposite of each other, even if the outcomes are monetarily the same. Prospect Theory led cognitive psychology in a new direction that began to uncover other human biases in thinking that are probably not learned but are part of our brain’s wiring.

Thinking fast and slow.

NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS by Richard H. Thaler and Cass R. Sunstein Penguin Books, 2009, 312 pp, ISBN 978-0-14-311526-7This book is best described formally as a general explanation of and advocacy for libertarian paternalism, a term coined by the authors in earlier publications. Informally, it is about how leaders, systems, organizations, and governments can nudge people to do the things the nudgers want and need done for the betterment of the nudgees, or of society. It is paternalism in the sense that "it is legitimate for choice architects to try to influence people's behavior in order to make their lives longer, healthier, and better", (p. 5) It is libertarian in that "people should be free to do what they like - and to opt out of undesirable arrangements if they want to do so", (p. 5) The built-in possibility of opting out or making a different choice preserves freedom of choice even though people's behavior has been influenced by the nature of the presentation of the information or by the structure of the decisionmaking system. I had never heard of libertarian paternalism before reading this book, and I now find it fascinating.Written for a general audience, this book contains mostly social and behavioral science theory and models, but there is considerable discussion of structure and process that has roots in mathematical and quantitative modeling. One of the main applications of this social system is economic choice in investing, selecting and purchasing products and services, systems of taxes, banking (mortgages, borrowing, savings), and retirement systems. Other quantitative social choice systems discussed include environmental effects, health care plans, gambling, and organ donations. Softer issues that are also subject to a nudge-based approach are marriage, education, eating, drinking, smoking, influence, spread of information, and politics. There is something in this book for everyone.The basis for this libertarian paternalism concept is in the social theory called "science of choice", the study of the design and implementation of influence systems on various kinds of people. The terms Econs and Humans, are used to refer to people with either considerable or little rational decision-making talent, respectively. The various libertarian paternalism concepts and systems presented are tested and compared in light of these two types of people. Two foundational issues that this book has in common with another book, Network of Echoes: Imitation, Innovation and Invisible Leaders, that was also reviewed for this issue of the Journal are that 1 ) there are two modes of thinking (or components of the brain) - an automatic (intuitive) process and a reflective (rational) process and 2) the need for conformity and the desire for imitation are powerful forces in human behavior. …

Nudge: Improving Decisions about Health, Wealth, and Happiness

It comes as something ofa surprise to reflect that the New York Review ofBooks is now over twenty years old. Even people of my generation (that is, old enough to remember the revolutionary 196os but not young enough to have taken a very exciting part in them) think of the paper as eternally youthful. In fact, it has gone through years of relatively quiet life, yet, as always in a competitive journalistic market, it is the controversies that attract the interest of the reader and to which the history (especially an admittedly impressionistic survey that tries to include something of the intellectual context in which a journal has operated) must give some attention. Not all the attacks which the New York Review has attracted, both early in its career and more recently, are worth more than a brief summary. What do we now make, for example, of Richard Kostelanetz's forthright accusation that 'The New York Review was from its origins destined to publicize Random House's (and especially [Jason] Epstein's) books and writers'?1 Well, simply that, even if the statistics bear out the charge (and Kostelanetz provides some suggestive evidence to support it, at least with respect to some early issues), there is nothing surprising in a market economy about a publisher trying to push his books through the pages of a journal edited by his friends. True, the New York Review has not had room to review more than around fifteen books in each issue and there could be a bias in the selection of

http://www.jstor.org/stable/pdfplus/3507774.pdf

The New York Review of Books

The psychology of social norms.

This Review presents basic facts regarding the long-run evolution of income and wealth inequality in Europe and the United States. Income and wealth inequality was very high a century ago, particularly in Europe, but dropped dramatically in the first half of the 20th century. Income inequality has surged back in the United States since the 1970s so that the United States is much more unequal than Europe today. We discuss possible interpretations and lessons for the future.

Inequality in the long run

A core tenet of the American ethos is that there is considerable economic mobility. Americans seem willing to accept vast financial inequalities as long as they believe that everyone has the opportunity to succeed. We examined whether people's beliefs about the amount of economic mobility in the contemporary United States conform to reality. We found that (a) people believe there is more upward mobility than downward mobility; (b) people overestimate the amount of upward mobility and underestimate the amount of downward mobility; (c) poorer individuals believe there is more mobility than richer individuals; and (d) political affiliation influences perceptions of economic mobility, with conservatives believing that the economic system is more dynamic-with more people moving both up and down the income distribution-than liberals do. We discuss how these findings can shed light on the intensity and nature of political debate in the United States on economic inequality and opportunity.

Building a more mobile America--one income quintile at a time.

Rates of participation in organ donation programs are known to be powerfully influenced by the relevant default policy in effect (“opt-in” vs. “opt-out”). Three studies provide evidence that this difference in participation may occur in part because the requirement to opt-in or opt-out results in large differences in the meaning that individuals attach to participation. American participants in Study 1 rated participation as a significantly more substantial action when agreement was purportedly obtained under opt-in rather than opt-out conditions, and nonagreement as a greater abrogation of responsibility when that decision was made under opt-out rather than under opt-in conditions. Study 2 replicated these findings with respondents who live in Germany, which employs an opt-in donation policy, and in Austria, which has an opt-out policy. Study 3 required American participants to rate various actions that differ in the effort and self-sacrifice they demand. As predicted, the placement of organ donation on the resulting multidimensional scaling dimension differed significantly depending on whether it purportedly was made in an opt-in country (where it was considered roughly akin to giving away half of one’s wealth to charity upon one’s death) or an opt-out country (where it fell between letting others get ahead of one in line and volunteering some time to help the poor). We discuss the relationship between this change of meaning account and two other mechanisms—behavioral inertia and implicit norms—that we believe underlie the default effect in decision making and other effects of policies designed to influence decision-makers.

https://www.pnas.org/content/pnas/109/38/15201.full.pdf

The meaning of default options for potential organ donors

Why do Americans believe in economic mobility? Economic inequality, external attributions of wealth and poverty, and the belief in economic mobility

Seven studies provide evidence of an availability bias in people's assessments of the benefits they've enjoyed and the barriers they've faced. Barriers and hindrances command attention because they have to be overcome; benefits and resources can often be simply enjoyed and largely ignored. As a result of this "headwind/tailwind" asymmetry, Democrats and Republicans both claim that the electoral map works against them (Study 1), football fans take disproportionate note of the challenging games on their team's schedules (Study 2), people tend to believe that their parents have been harder on them than their siblings are willing to grant (Study 3), and academics think that they have a harder time with journal reviewers, grant panels, and tenure committees than members of other subdisciplines (Study 7). We show that these effects are the result of the enhanced availability of people's challenges and difficulties (Studies 4 and 5) and are not simply the result of self-serving attribution management (Studies 6 and 7). We also show that the greater salience of a person's headwinds can lead people to believe they have been treated unfairly and, as a consequence, more inclined to endorse morally questionable behavior (Study 7). Our discussion focuses on the implications of the headwind/tailwind asymmetry for a variety of ill-conceived policy decisions. (PsycINFO Database Record

The headwinds/tailwinds asymmetry: An availability bias in assessments of barriers and blessings.

Although decades of research show that people tend to see themselves in the best possible light, we present evidence that people have a surprisingly grim outlook on their social lives. In 11 studies (N = 3,293; including 3 preregistered), we find that most people think that others lead richer and more active social lives than they do themselves. We show that this bias holds across multiple populations (college students, MTurk respondents, shoppers at a local mall, and participants from a large, income-stratified online panel), correlates strongly with well-being, and is particularly acute for social activities (e.g., the number of parties one attends or proximity to the "inner circle" of one's social sphere). We argue that this pessimistic bias stems from the fact that trendsetters and socialites come most easily to mind as a standard of comparison and show that reducing the availability of extremely social people eliminates this bias. We conclude by discussing implications for research on social comparison and self-enhancement. (PsycINFO Database Record

Shai Davidai

Papers

Building a more mobile America--one income quintile at a time.

The meaning of default options for potential organ donors

Why do Americans believe in economic mobility? Economic inequality, external attributions of wealth and poverty, and the belief in economic mobility

The headwinds/tailwinds asymmetry: An availability bias in assessments of barriers and blessings.

Home alone: Why people believe others' social lives are richer than their own.