Course description
The main goal of this course is to provide a general overview of how principles and methods of behavioral economics can be used to improve welfare and design better and more effective policy. Building on the knowledge generated in the last 30 years in the area of behavioral economics, this course allows the student to develop a hands-on approach by learning and applying the methods of behavioral economics to design nudging interventions. We will review research on human decision making from psychology and the set of tools available to change people’s behavior.
Over the three modules of the course, students will be able to a) explain and interpret the principles underlying decision-making and compare the nudging approach to other tools of behavior change, b) learn how to critique, design and interpret the results of experiments; and c) design nudges and decision-tools to help people make better decisions.
Topics
Part 1: Behavioral Economics in Action: Nudging
What is a nudge?
Other tools of behavioral change
Part 2: Applications of Nudging
Spending, Saving and Financial Decisions
Health and wellbeing
Education
Energy Efficiency and the Environment
Tax Compliance
Developing Countries
Part 3: Designing a Nudge
Designing your nudge in 10 steps
Prerequisites
No specific previous knowledge of behavioral and experimental economics is required.
Learning outcomes
At the end of the course, students should be able to:
Knowledge:
• Review the most recent developments and theories of human decision-making from Behavioral Economics.
• Analyze the tools of behavioral change and compare their effectiveness to change specific behaviors.
Skills:
• Reflect on how experiments and randomized controlled trials work and why this methodology is critical for making inference about causal relationships.
• Debate and discuss critically several interventions that have been conducted to change people’s behavior in the domain of energy efficiency, health and well-being, dishonesty, charitable giving, education and work performance.
Competences
• Examine (real-world) cases where people make decisions that are inconsistent with the assumptions of rational decision making and analyze the consequences of this irrational behavior for the society.
• Design experiments and develop policy interventions aimed at increasing societal well-being and improve people’s life.
Syllabus
Students have to read critically several papers. A preliminary reading list includes:
General on tools for behavioral change
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, 28(8), 1041-1055.
Bicchieri, C., & Dimant, E. (2019). Nudging with care: the risks and benefits of social information. Public choice, 1-22.
Hausman & Welch (2010). Debate: To Nudge or Not to Nudge. Journal of Political Philosophy.
Ly, K., Mazar, N., Zhao, M., Soman, D. (2003). A Practitioner's Guide to Nudging; Research Report Series, Rotman School of Management.
Madrian (2014). Applying Insights from Behavioral Economics to Policy Design. Annual Review of Economics.
Mills, S. (2020). Nudge/sludge symmetry: On the relationship between nudge and sludge and the resulting ontological, normative and transparency implications. Behavioural Public Policy, 1-24. doi:10.1017/bpp.2020.61
Pomeranz (2011) "Impact Evaluation Methods: A Brief Introduction to Randomized Evaluations in Comparison with Other Methods."
Sunstein, Cass R., Nudging: A Very Short Guide (September 22, 2014). Available at SSRN: http://ssrn.com/abstract=2499658.
Sunstein, C. R. (2019). Sludge audits. Behavioural Public Policy, 1-20.
Thaler, R., (2018), “Nudge, not sludge”, Science 03 Aug 2018: Vol. 361, Issue 6401, pp. 431. DOI: 10.1126/science.aau9241
Applications to Spending, Saving and Financial Decisions
Benartzi & Thaler (2004), Save More Tomorrow, Journal of Political Economy
Bertrand, M. and Morse, A., (2011), Information Disclosure, Cognitive Biases, and Payday Borrowing. The Journal of Finance, 66: 1865–1893.
Chetty et al. (2012), Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark, NBER Working Paper
Choi, Laibson & Madrian (2009). Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect. American Economic Review.
Thomas F. Crossley, Carl Emmerson and Andrew Leicester, (2012), Raising Household Saving, Institute For Fiscal Studies, London February 2012.
Damgaard, M. T., & Gravert, C. (2018). The hidden costs of nudging: Experimental evidence from
reminders in fundraising. Journal of Public Economics, 157, 15-26.
Applications to Health and wellbeing
Charness & Gneezy (2009). Incentives to exercise. Econometrica.
Giné, Karlan & Zinman (2010). Put your money where your butt is: a commitment contract for smoking cessation. American Economic Journal: Applied Economics.
Handel, B. R. (2013). Adverse selection and inertia in health insurance markets: When nudging hurts. The American Economic Review, 103(7), 2643-2682.
Hanks et al. (2012), Healthy Convenience: Nudging Students Toward Healthier Choices in the Lunchroom, Journal of Public Health.
Johnson & Goldstein (2003). Do defaults save lives? Science
Rozin et al. (2011), Nudge to nobesity I: Minor changes in accessibility decrease food intake, Judgment and Decision Making.
Volpp et al. (2009). A randomized, controlled trial of financial incentives for smoking cessation. New England Journal of Medicine.
Voyer, Benjamin G. (2015) ‘Nudging’ behaviours in healthcare: insights from behavioural economics. British Journal of Healthcare Management, 21 (3). pp. 130-135. ISSN 1358-0574
Applications to Education
Bettinger et al. (2012). The Role of Application Assistance and Information in College Decisions: Results from the H&R Block Fafsa Experiment. The Quarterly Journal of Economics.
Damgaard, M. T., & Nielsen, H. S. (2018). Nudging in education. Economics of Education Review, 64, 313-342.
Doss, C., Fahle, E. M., Loeb, S., & York, B. N. (2019). More Than Just a Nudge Supporting Kindergarten Parents with Differentiated and Personalized Text Messages. Journal of Human Resources, 54(3), 567-603.
Fryer et al. (2012). Enhancing the efficacy of teacher incentives through loss aversion: a field experiment. NBER.
Levitt et al. (2012). The behavioralist goes to school: Leveraging behavioral economics to improve educational performance. NBER.
Applications to Energy Efficiency and the Environment
Alexandra, T. A. Can Small Incentives Have Large Effects? The Impact of Taxes versus Bonuses on Disposable Bag Use. American Economic Journal: Economic Policy.
Allcott (2011). Social norms and energy conservation. Journal of Public Economics.
Allcott & Rogers (2014). The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation. The American Economic Review.
Carlsson, F., Gravert, C., Johansson-Stenman, O., & Kurz, V. (2019). Nudging as an environmental policy instrument (No. 756).
Kallbekken, S., & Sælen, H. (2013). ‘Nudging’hotel guests to reduce food waste as a win–win environmental measure. Economics Letters, 119(3), 325-327.
Applications to Tax Compliance
Bott, Erik Ø, Cappelen, A. W., Sørensen and Bertil Tungodden, (2014), You’ve got mail: a randomized field experiment on tax evasion``, NHH department of Economics Discussion Paper 26/2014.
Kleven, H. J., Knudsen, M. B., Kreiner, C. T., Pedersen, S., and Saez, E., (2011), Unwilling or unable to cheat? Evidence from a tax audit experiment in Denmark. Econometrica, 79(3),
651-692.
Michael Hallsworth, John List, Robert Metcalfe, Ivo Vlaev, (2014), ``The Behavioralist As Tax Collector: Using Natural Field Experiments to Enhance Tax Compliance´´, NBER Working Paper No. 20007.
Shu et al. (2012). Signing at the beginning makes ethics salient and decreases dishonest self-reports in comparison to signing at the end. PNAS.
Additional references to relevant papers will be provided during the course.
Course Information
Instructor: Natalia Montinari School: University of Bologna, School of Economics
Teaching methods
Presentation and discussion of selected papers. Particular attention will be devoted to specific methodological aspects related to the use of the different tools to influence human behavior. All students are expected to carefully read all required papers and participate to the discussions.
Assessment methods
In-class participation: 50% of the final mark.
Individual presentation: 50% of the final mark. The presentation should present an idea for a nudge following this structure: 1. Introduction and motivation (overview of the issue and the current debate, discussing the nudge that is closer to your proposed intervention, if any). The nudge (present your proposal). Discussion (discuss the limits and potential spillovers effect associated to your proposed nudge).