Dear all,
I hope that you managed to advance quite well with the readings and that you are ready to discuss the ideas that Thaler and Sunstein advocate in their famous book Nudge.
The next session, however, will consist in giving a more detailed overview of the works that has been done in the last fifty years or so that demonstrates that humans make irrational choices--in a systematic and predictable way.
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I have put the slides of the previous session online. Here is a brief reminder of what we did:
- I emphasised that the idea of Nudges and more generally the use of cognitive psychology in policy-making was increasingly popular. I listed some key institutions that actually influence policy-making, especially the so called Behavioral Insight Teams.
- I very briefly presented the core idea of Rational Choice Theory: it describes a procedure for making choices. This procedure take into consideration (a) what options there are: the choice set; (b) what things are likely to happen (uncertainty); (c) the desirability of the outcomes (utility). With these, one can calculate what choice lead to what *expected utility*. In view of the result, one make the choice that leads to the highest expected utility. In that way, one maximises the expected utility. I note that we also did a short visit to the extension of Rational Choice Theory to strategic situations--namely Game Theory. We talked about the Prisoner Dilemma and The Tragedy of the Commons.
- Last, I explained why it is (still) useful to know about Rational Choice Theory. More precisely:
It is a powerful and predictive model for designing incentive schemes
It is the traditional model relied upon by policy-maker.
It provides the benchmark for justifying the claim that humans are predictably irrational
It might describe something true about human cognition
A word on assignments:
You are requested to write a "handout". Please fill in the following spreadsheet for letting us know what are your preferences:
https://docs.google.com/spreadsheets/d/173KJ18BISePGYH3hwcTYnPAmx2lAwYTJcvJOuRA01QI/edit?usp=sharing
One of the main goal of the course will be to work--in teams--on a choice architecture. You can start brainstorming with ideas and teaming up using the same spreadsheet (the second tab, called Design a Nudge-- Assignment).
And of course, keep your eyes open on choice architectures around you. At the moment, it is Eva Wittenberg who is the winner of the Worst Choice Architecture competition!
Best,
Christophe