A Conversation with Daniel Kahneman

Mindy Hernandez, Founder, One Decision

Professor Daniel Kahneman's research into human behavior and decision making was critical to the formation of the field now known as "Behavioral Economics". Less importantly to the world at large, he was also critical to the formation of the way I think about human behavior and applied psychology.?He is a psychologist by training, but won the Nobel Prize in Economics with Amos Tversky for his work on Prospect Theory. I was lucky enough to be a student of his, and often when I think about applying behavioral research in the field I think of Professor Kahneman: WWDKD? (What would Daniel Kahneman Do?) So I called him up recently to ask him what he thinks about the increasing application of some of behavioral theory.

Why "Behavioral Economics"?

Kahneman started out by mentioning that it's odd that this field has come to be known as behavioral economics when in fact it's very much economically informed social psychology--the ideas of how to bring people to change behavior go back a long way and have their roots in social psychology.

The basic idea of applied psychology is from Kurt Lewin: if we want people to change, how do we make it easy? (and not focus on monetarysubsidies). This is the basic idea in Eldar Shafir and Sendhil Mullinthan's work .(Eldar and Sendhil are both founders and directors of ideas42. ) Kurt Lewin said: if you want to get people to change, ask why aren't people behaving in ways we or they themselves want? What are the obstacles? And then we need to try to eliminate those obstacles and remove the barriers.

This seems simple and self-evident, but why is removing obstacles instead of adding pressure or incentives so counter-intuitive? Kahneman mentioned the three usual ways we try to induce change:

  • Arguing
  • Promising
  • Threatening

These techniques often fail because we are simply increasing tension rather than easing tension by removing barriers that make behavior change easy. (Think about how quick we are to add rules to a classroom to control behavior rather than think about what barriers students might face to sitting quietly for hours on end. What if classes started later in the morning? I know I would be more likely to be on time and pay attention...)

The application of behavioral theory is happening! (And what we should be concerned about as we move from theory to application)

For Kahneman, Save More Tomorrow was a breakthrough and changed the world in significant ways. The application of these ideas is happening and impossible to stop now. Indeed, one of the co-authors of Nudge: Improving Decisions About Health, Wealth, and Happiness (Cass Sunstein) is now in charge of Federal regulation as Administrator of the White House Office of Information and Regulatory Affairs.

Kahneman mentioned that, without consideration and care, "choice architecture" could become manipulation. So it's important to be very transparent about our intentions and insure people's freedom to the greatest degree possible. In my work, I think of this as the difference between "manipulation" and "facilitation". The work that we are doing focuses on helping people act on their best intentions. People express a desire to save more for retirement, graduate from college, or simply become more energy conscious.

Advice to people who want to apply behavioral ideas to their programs?

Kahneman had some very straightforward advice:

Read Nudge by Sunstein and Thaler and Cialdini on Influence.

I asked him what advice he might give after people have finished the books. Again, straight-forward advice from Dr. Kahneman:

"Read them again." Many of the ideas are deceptively easy so you will likely miss things.

And after you've read each book twice? We'll talk about that in blog posts to come... One organization I met with is starting a reading group for the staff to read through Nudge. A great first step, I think!

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By kathryn murdock on January 11, 2010 9:44 PM

I am not a distinguised author or have a book out - as yet - but I work in financial education and the first words in a workshop are: "It's not about money or budgets -its about how you want to manage your life."This seems to strike a chord and they listen more intently to words about making choices, goals, risk taking, life changes - and much of the discussion will be about how each person will have a little different agenda - how they choose to modify THEIR life not some generic life offered in many "money mangement" courses. This reduces the barriers of conforming to some pre-determined ideal budget - as most of othe people I work with are low and very low income the 'budgets and how to manage money or to save' are meaningless.


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