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    Elective Course, 2 credits, Spring 2023 

    Tuesdays, 10:30 am; Fridays, 10:30 am; room: QS C-210

    Start date: April, 18th.  Important note: No course will be given on week 2: Tues. April 25th and Fri. April 28th. These courses will be given on May 23rd and 26th.

    Zoom: https://ceu-edu.zoom.us/j/4936511580?pwd=bktFRENqR21YOWtiK3kva3AyWXpDQT09 ; Meeting ID: 493 651 1580; Passcode: 2YWA1n; Policy: Onsite attendance is strongly preferred. Attend online only if you have very good reasons to do so.

    Assignment: distribution of tasks are coordinated by means of this Google spreadsheet: https://docs.google.com/spreadsheets/d/173KJ18BISePGYH3hwcTYnPAmx2lAwYTJcvJOuRA01QI/edit?usp=sharing

    Course objectives

    How can advances in behavioral sciences (Cognitive Science, Experimental and Behavioral Economics) inform policy-making? How can policies be improved by taking findings from these studies?

                Traditional policy making assumes that citizens are rational agents who always take the best decisions for themselves. Yet, findings in behavioral economics and cognitive psychology show that it is not the case: people are “predictably irrational.” These findings open new avenues for making policies that foster individual decisions that are better for both the individual and society.

                The course addresses the method, welfare implications and moral basis of the use of behavioral sciences in policy making. This includes issues in contemporary political philosophy regarding the legitimacy of using scientific theories about human behavior for political purposes. It also includes issues in behavioral economics and its relevance to policy making. We shall review along the ways findings in cognitive psychology, theories about how the human mind works, and the type of evidence scientists rely upon.

    Course Structure

    The course will include old fashioned lectures, seminars, one or more debates (British parliamentary style) and a ‘nudge fair’ in which students shall present a ‘nudge’ of that they will have designed. A lecture summarizes the main theoretical and empirical advances in each topic, and the seminar is devoted to the discussion of the reading material and the lab to apply these concepts to improve policies for current issues.

                The sessions will explain the core of the theory: 

    - Models of decision making for policy making; 

    - Rational decision making and bounded rationality; 

    - Experimental economics: relevant methods and results;

    - Choice architecture and nudge;

    - Examples of nudges; 

    - Evidence based policy making. 

                Some sessions will be dedicated to reflections on the Pros and cons of Nudging: 

    - Moral issues;

    - Comparative efficiency of nudges.

     Learning outcomes

    In this course, students will acquire knowledge about, and will reflect on:

    • theories in cognitive science deemed to be relevant to policy making; these mainly include experimental work on biases in decision-making.
    • specific applications of policy-making informed by cognitive psychology/science, behavioral economics, game theory, whether exploiting the theories of psychology for policy-making can be understood as beneficial or even acceptable, depending on one's ethical principles

    Requirements:

    All students must read the core reading before the lectures and seminars. Students are expected to contribute to class discussion and should have posted on the Moodle questions based on the texts and that could be fruitfully addressed during class discussion. Students are expected to post at least one question per week (i.e. one per two session).  

    Students shall prepare and participate in the organised debate(s). For debates, students will be divided in teams and given one week to prepare for the topic and the position in the debate. Teams will choose one or two speakers but all the members of the team need to contribute the preparation of the debate: selecting and organising ideas, identifying good arguments and counter-arguments.

    Each student will especially engage with at least one paper of the syllabus and prepare a handout for that paper.

    Students shall present or critically comment a choice architecture/a nudge. This will be organised as a teamwork. The work should:

    • Present a choice architecture
    • Explain the goal of the choice architecture: which behaviour is promoted and why? What are the reasons why the nudge is needed? In what way would it improve people’s life?
    • Describe the psychological processes at stake. What processes lead to undesirable behaviours? What processes does the cognitive architecture trigger?
    • Identify the evidence, if any, that support claims made in 2. Describe the nature of the evidence (behavioural data from experiments, Randomized Control Trial, ethnographic data, common sense, …) and assess its strength.
    • Tell what further data should be gathered, why and how. What experiment, for instance, would enable assessing the efficiency of the nudge?
    • Evaluate the moral permissibility of the nudge. Does it respect the nudgees? Does it go against their autonomy?
    • Specify the processes for quality control assessment and production of the nudge.
    • Raise some further relevant issues.

    The analysis should take the form of both a short written report and an oral presentation to the class.

    Note: Students who prefer to write an individual short essay to participating to the above group activity might be given the authorisation to do so after discussing with the instructors.

    Grades will be awarded as follows:

    • Presentation of a nudge in the nudge fair 30%
    • Short tests: 20% 
    • Assessment of debate(s): 10%
    • Class participation and attendance: 10%
    • Handout for one of the paper: 15%
    • Questions asked on the Moodle: 15%


  • 1. Public policy and its psychological assumptions (18/4)

    The goal of this sessions is to reveal the psychological assumptions that are necessarily built into public policies. The standard assumption is that humans are rational decision makers. What does this assumption amount to? What are its pros and cons? Are there better models of human decision making? 


  • 2. What is a nudge? (21/4)

    This session will be dedicated to: 

    1. explaining the idea of ‘libertarian paternalism’ that motivates nudging, in contrast with other kinds of paternalisms.
    2. specifying what criteria could be used for distinguishing nudges from other political interventions
    3. clarifying what kind of assumptions there is behind the advocacy of nudging policies.

     

    Required reading:

    • Thaler and Sunstein, Nudge (2008), chs. 1, 4, and 15 

    Further readings:

    • Saghai, S. ‘Salvaging the concept of nudge’, J Med Ethics (2013) 39: 487-493 
    • Gigerenzer, G. (2015). On the Supposed Evidence for Libertarian Paternalism. Review of Philosophy and Psychology, 1-23.


  • 3. Predictably irrational—a review of cognitive biases (2/5)

    In this session, we will describe a model of human decision making that hypothesized the existence of multiple cognitive biases. We will first review some of the most famous cognitive biases (such as the sunk-cost fallacy or the hot-hand fallacy) and heuristics (such as the representativeness heuristics). We will explain elements of Prospect Theory as a model of decision making that relaxes the rationality assumptions. We will then reflect on views of human cognition that could account for these predictably irrational behaviours: ecological and bounded rationality.

    Required reading:

    • Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases: Biases in judgments reveal some heuristics of thinking under uncertainty. Science, 185(4157), 1124-1131.

    Further readings:

    • Haselton MG, Nettle D, Andrews PW (2005). "The evolution of cognitive bias" . In Buss DM (ed.). The Handbook of Evolutionary Psychology. Hoboken, NJ: John Wiley & Sons Inc. pp. 724–746.
    • Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. science, 211(4481), 453-458.


  • 4. Experimental economics: methods and evidence (5/5)

    How do experimental economists document cognitive biases? What are the method used and why? In this session, we will pursue our investigation of predictable irrationality by moving to the methods of experimental economics and cognitive psychology. 

    Required reading:

    • Shampanier, Kristina, Nina Mazar, and Dan Ariely. "Zero as a special price: The true value of free products." Marketing Science 26.6 (2007): 742-757.

     Further reading:

    • Guala, F. (2005). The methodology of experimental economics. Cambridge University Press.


  • 5. Nudging against procrastination (9/5)

    The session will be focused on time inconsistent choices, their psychological basis and the way to nudge against them. Key notions include hyperbolic discounting, weakness of the will and second order preferences (e.g. I wish I did not want to smoke).

     

    Recommended readings (pick one or more):

    • Elster, Jon (2000) Ulysses Unbound Chapter 1 (until p. 33.)
    • Schrift, R. Y., & Parker, J. R. (2014). Staying the Course: The Option of Doing Nothing and Its Impact on Postchoice Persistence. Psychological Science.
    • Ariely, Dan (2008) Predictably Irrational  Chapter 7.


  • 6. Moral issues regarding paternalism, autonomy and respect: illustrated with medical decision-making (12/5)

    Students will be asked to ponder on the following questions: Is there a clear difference between nudging and strong paternalism? Which one? Is Nudging is truly respectful? Does it respect the autonomy of the citizens? If not, should nudging be avoided? We will discuss these questions focusing on health decision-making.

    Recommended readings (pick one of these two):

    • Schwab, A. P. (2008). Putting cognitive psychology to work: Improving decision-making in the medical encounter. Social Science & Medicine, 67(11), 1861-1869.
    • Legrand and New. Government Paternalism, Chs. 2-3


    Further readings:



  • 7. The Debate: Arguments for and against nudging (16/5)

    Should policy makers continue using the good old means, viz. changing incentives, and only those means? We'll look at these reasons and assess the trade-offs (pros and cons). In this session, students will be asked to take a role in a debate, in which they will impersonate some of the scientists and philosophers involved in the current discussions.

     

    Recommended reading:

    Argument against nudging

    • Chater, N., & Loewenstein, G. (2022). The i-frame and the s-frame: How focusing on individual-level solutions has led behavioral public policy astray. Behavioral and Brain Sciences, 1-60.
    • M.J. Rizzo and D.G. Whitman (2009) “The Knowledge Problem of New Paternalism,” BYU Law Review. FROM PAGE 907 TO 912 AND FROM 960 TO 968.

     

    Argument for nudging

    • Hallsworth, M. (2023). A manifesto for applying behavioural science. Nature Human Behaviour, 1-13.
    • Benartzi, S., Beshears, J., Milkman, K. L., Sunstein, C. R., Thaler, R. H., Shankar, M., ... & Galing, S. (2017). Should Governments Invest More in Nudging?. Psychological Science, 0956797617702501.
    • Chapter 5 of Thaler, R. H. (2015). Misbehaving: The making of behavioral economics. WW Norton & Company.


    Arguments that have been used during the debate

  • 8. Fostering prosocial behaviour (19/5)

    In this session, we will look at social preferences and nudging. We’ll examine findings that explicit economic incentives designed to promote pro-social behavior sometimes are counterproductive or less effective than would be predicted among entirely self-interested individuals. We discuss how policy-making can take into account individuals’ altruism, ethical norms, intrinsic motives to serve the public good.

     

    Required video lecture:

    Bowles, Samuel. (2015)."Machiavelli’s mistake: Why good laws are no substitute for good citizens." https://epe.yale.edu/videos/castle-lecture-series-machiavellis-mistake-why-good-incentives-are-no-substitute-good-1

    Further readings

    • Kraft-Todd, Gordon, Erez Yoeli, Syon Bhanot, and David Rand. "Promoting cooperation in the field." Current Opinion in Behavioral Sciences 3 (2015): 96-101. 
    • Alpizar, Francisco, Fredrik Carlsson, and Olof Johansson-Stenman. "Anonymity, reciprocity, and conformity: Evidence from voluntary contributions to a national park in Costa Rica." Journal of Public Economics 92.5 (2008): 1047-1060. 
    • Kasperbauer, T.J. 2015. ‘Psychological Constraints on Egalitarianism: The Challenge of Just World Beliefs’


  • 9. Nudging for the poor (23/5)

    Is there something special with nudging in developing countries? Reasons to give a positive answers include:

    a) while developed countries already have pretty good choice architectures, developing countries do not.

    b) precarious conditions and poverty might influence decision making is specific ways.

    Required reading

    • Shah, A. K., Mullainathan, S., & Shafir, E. (2012). Some consequences of having too little. Science, 338(6107), 682-685.

     

    Further readings:

    • Banerjee, Abhijit, et al. "The miracle of microfinance? Evidence from a randomized evaluation." American Economic Journal: Applied Economics 7.1 (2015): 22-53.
    • Ashraf, Nava, Dean Karlan, and Wesley Yin. 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, 121(2): 635-672, May. 
    • Duflo, E., M. Kremer, and J. Robinson (2011), “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya,” American Economic Review, 101(6), 2350–2390. 
    • Hanna, Mullainathan and Schwartzstein, “Learning Through Noticing: Theory and Experimental Evidence in Farming”, 2012. 


  • 10. Evidence based policy making and the efficiency of Nudges (26/5)

    We will look how empirical data can be gathered for policy making (lab experiments and randomized control trial) and what analyses can be done. We will focus on the scientific method and discuss what is good science and how we can recognise it. 

    One key question is the comparative efficiency of Nudges: what is the measure of efficiency and how can it be assessed?

     

    Recommended readings:

    Further readings:

    • Mullainathan and Schwartzstein, “A Reduced-Form Apprach to Behavioral Public Finance,” Annual Review of Economics. 
    • Chetty, Raj, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez. 2014 “Where Is the Land of Opportunity? The Geography of Inter- generational Mobility in the United States.” Quarterly Journal of Economics 129 (4): 1553–1623. 
    • Chetty, Raj, and Nathan Hendren. 2015. “The Effects of Neighborhoods on Chil- dren’s Long-Term Outcomes: Quasi-Experimental Estimates for the United States.” Unpublished. 


  • 11. Quality control processes (30/5)

    In this session, we will discuss the practices implemented by Nudge teams and other units that do nudge.  The first question is whether Nudges are themselves the most efficient means to achieve the desired goals. What processes are used to evaluate the comparative efficiency of nudges? Should nudging practices be regulated? How? What kind of institutions would lead to the production of the best nudges?

     

    Recommende readings: 

    • Blazsek and Heintz, Quality control for nudgers, working paper.
    • Heintz, C. Deliberated nudges. Working paper.


  • The Nudge fair! (2/6)

    [Student presentations]

    Groups of students will select a nudge that they are willing to analyse. They will point out the underlying psychology motivating or enabling the nudge and they will analyse whether the nudge conforms to principles of liberal paternalism or other normative principles. They will also specify the implementation and consider possible unintended effects. In the following week, groups will present their work on this nudge. Among the possible nudges to be analysed are the following:

    Nudging against smoking

    Barton, A. How tobacco health warnings can foster autonomy. Public Health Ethics, 6(2), 2013. Pp. 207-219.

    Using laptops during courses (students will have to discuss whether teachers should nudge against using laptops during course and how)

    Mueller, P., and Daniel M. Oppenheimer, ‘The Pen Is Mightier Than the Keyboard: Advantages of Longhand Over Laptop Note Taking’, Psychological Science 25( 2014), pp. 1159-68.

    Sana, F., T. Weston and N. Cepeda ‘Laptop multitasking hinders classroom learning for both users and nearby peers’Computers and Education, 62 (2013) 24-31.  

    Sin taxes

    O'Donoghue, Ted, and Matthew Rabin. "Optimal sin taxes." Journal of Public Economics 90.10 (2006): 1825-1849.

    Peer effect and shaming

    Duflo, Esther, and Emmanuel Saez. The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment. No. w8885. National Bureau of Economic Research, 2002.

    Cooling-off

    Rekaiti, Pamaria, and Roger Van den Bergh. "Cooling-off periods in the consumer laws of the EC Member States. A comparative law and economics approach." Journal of Consumer Policy 23.4 (2000): 371-408.

    The nudges actually implemented by the insight team in the UK.

    http://www.behaviouralinsights.co.uk/

     

    Nudging at CEU: against procrastination, for eco-friendly behavior, in favor of pedagogic behaviour from faculty (e.g. finishing on time, giving timely feedback, motivating students), and against some sins that students might commit.