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I N C E N T I V E S & H U M A N B E H AV I O R MPA 612: Economy, Society, and Public Policy January 23, 2019 Fill out your reading report on Learning Suite P L A N F O R T O D A Y Fixing collective action problems Fun and games

  1. I N C E N T I V E S & H U M A N B E H AV I O R MPA 612: Economy, Society, and Public Policy January 23, 2019 Fill out your reading report on Learning Suite

  2. P L A N F O R T O D A Y Fixing collective action problems Fun and games Heuristics and shortcuts Nudges

  3. F I X I N G C O L L E C T I V E AC T I O N P R O B L E M S

  4. Perfectly rational individual behavior can create irrational and inferior social outcomes

  6. C O O P E R A T I O N I N S T A G H U N T L A N D The payoffs for cooperation are greater than the payoffs for defection There’s still an incentive to defect

  7. W H A T S T O P S U S F R O M C O O P E R A T I N G ? Uneven payoffs Lack of assurance Preference falsification Dishonesty Selfishness These are all rational things that utility-maximizing people do!

  8. H O W D O W E F I X T H I S ? Altruism Repetition and iteration Infinitization Punishment Institutions Norms

  9. F U N A N D G A M E S

  10. Go to andhs.co/quiz1 and take a quiz

  11. Go to andhs.co/quiz2 and take a quiz

  12. Go to andhs.co/quiz3 and take a quiz

  14. 8 × 7 × 6 × 5 × 4 × 3 × 2 × 1

  15. 1 × 2 × 3 × 4 × 5 × 6 × 7 × 8

  16. H E U R I S T I C S A N D S H O R TC U T S

  17. H U M A N R A T I O N A L I T Y People are rational and always maximize utility Except when they aren’t and they don’t

  18. B O U N D E D R A T I O N A L I T Y We can’t process all information, but we can (and do!) filter and privilege information

  19. C O M M O N H E U R I S T I C S Representativeness Availability Adjustment and anchoring Time issues

  20. R E P R E S E N T A T I V E N E S S We make judgments based on how well information represents the norm Ignore base rates, think backwards, start with exceptions and stereotypes

  21. R E P R E S E N T A T I V E N E S S Insensitivity to prior probability of outcomes Insensitivity to sample size Misconceptions of chance Misconceptions of regression

  22. A V A I L A B I L I T Y We make judgments based on how quickly other examples come to mind

  23. A V A I L A B I L I T Y Biases due to the retrievability of instances Biases of imaginability Illusory correlation

  25. A D J U S T M E N T & A N C H O R I N G Different starting points yield estimates that are biased toward the initial values

  27. Today Next week $100 $110 December 25, December 31, 2020 2020

  28. T I M E I S S U E S Hyperbolic discounting We prefer immediate payoffs more than future payoffs

  30. T H E B A T T L E W I T H I N U S Intrapersonal strategic conflict Our present selves force their preferences on our future selves Chips and salsa Saving for retirement

  32. C O M M I T M E N T D E V I C E S Deadlines and coauthors Exercise pacts Save More Tomorrow

  33. N U D G E S

  34. W H A T I S A N U D G E ? Adjusting choice architecture in a way that helps people make better choices Libertarian paternalism

  35. Why nudge? Why not nudge?

  36. C O N D I T I O N S F O R N U D G I N G Costs now, benefits later Disconnect between costs and benefits Benefits now, costs later Choices are complex Mortgages Choices are rare Buying a car Getting married Low feedback High cholesterol diet Poor knowledge Health plans

  37. Examples of nudges?

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