event thumbnail image
International Association for Research in Economic Psychology (IAREP)

The economist as therapist: Behavioural economics and "light" paternalism

author: George Loewenstein, Department of Social and Decision Sciences, Carnegie Mellon University

Description

We review methodological issues that arise in designing, implementing and evaluating the efficacy of 'light' paternalistic policies. In contrast to traditional 'heavy-handed' approaches to paternalism, light paternalistic policies aim to enhance individual choice without restricting it. Although light paternalism is a 'growth industry' in economics, a number of methodological issues that it raises have not been adequately addressed. The first issue is how a particular pattern of behavior should be judged as a mistake, and, relatedly, how the success of paternalistic policies designed to rectify such mistakes should be evaluated – i.e.,the welfare criterion that should be used to judge light paternalistic policies. Second,paternalism, and especially light paternalism, introduces new motives for attempting to understand the psychological processes underlying economic behavior. An enhanced understanding of process can help to explain why people make mistakes in the first place,and, more importantly, provide insights into what types of policies are likely to be effective in correcting the mistakes. Third, there is an acute need for testing different possible policies before implementing them on a large scale, which we argue is best done in the field rather than the lab. Fourth, in addition to methodological issues, there are pragmatic issues concerning who will implement light paternalistic policies, especially when they involve positive expenditures. We discuss how economic interests can be rechanneled to supportendeavors consistent with light paternalism.

Categories

Top: Economics

You might be experiencing some problems with Your Video player.
Slides
0:00 The Economist as Therapist: Behavioural economics and "light" paternalism
2:44 Are you to incompetent to know what's best for yourself?
3:41 In fact, people often don’t know what’s best for themselves (and when they do, often have trouble getting themselves to do it)
5:44 Traditional economics not well equipped to deal with these problems; assumes that people..
6:30 Behavioral economics: allows for mistakes. People often...
7:20 Paternalism
7:51 However, widespread discomfort with ‘heavy-handed’ paternalism
9:05 Proposed solution: ‘light paternalism”
10:48 Common theme: using errors and biases that ordinarily hurt people to, instead, help them
11:12 An example: defaults
11:28 “Status quo bias” and defaults in organ donation (Johnson-Goldstein Sci 03)
12:20 Defaults fit the definition of both libertarian and asymmetric paternalism
14:12 Changes introduced into benefits package of large corporation..
15:41 Enrollment (1)
16:06 Enrollment (2)
16:43 Light paternalism has diverse ramifications
17:15 1. Need for alternative welfare criterion
17:57 Possible welfare criteria
18:33 Big problem with experience utility: adaptation
21:11 Possible welfare criteria
23:19 2. Importance of process
25:00 Example: Save More (AR) Tomorrow plan (Benartzi & Thaler)
26:39 First implementation of SMarT plan
26:55 3. Need for expanded field research (1)
28:26 3. Need for expanded field research (2)
29:38 Asset allocation
30:15 4. Channeling existing economic interests
32:15 Economist as therapist needs to identify commercial/government interests aligned with those of individuals
33:40 Some projects..
34:28 Warfarin Adherence (project with Kevin Volpp & Stephen Kimmel)
34:54 Warfarin (Coumadin): Anti-stroke medication
37:55 Importance of process..
39:41 Our solution..
40:24 How do we know if they took their warfarin?
41:43 Planned study
42:52 But, first need to prove it works..
44:27 Rates of non-adherence
45:09 Weight Loss Study
46:44 Incentive conditions
48:14 First month (1)
48:29 First month (2)
48:51 Results to date (4 months into study) (1)
49:16 Results to date (4 months into study) (2)
49:22 Saving (in progress; need partner!)
50:56 Usual Assumption: People don’t care about retirement
50:58 Alternative approach: lottery-based rewards
51:34 Conclusion

Lecture rating

People found this lecture:
Worth seeing
because it is:
 Valuable and informative
Well presented
Easily understandable
Acceptably recorded
You need to login to cast your vote.

Report a problem or upload files

If you have found a problem with this lecture or would like to send us extra material, articles, exercises, etc., please use our ticket system to describe your request and upload the data.
Enter your e-mail into the 'Cc' field, and we will keep you updated with your request's status.

Link this page

Would you like to put a link to this lecture on your homepage?
Go ahead! Copy the HTML snippet !

Reviews and comments:

Comment1 Miguel Barbosa, September 29, 2008 at 8:39 p.m.:

Hello,

Great lecture I have already linked to it from my website
http://www.simoleonsense.com

Miguel


Comment2 Stephen Kennedy, May 8, 2009 at 8:50 p.m.:

I want to date this man's daughters.
The joy of seeing the beauty of a mind like this is... indescribable.
Thank you.
I am so excited thinking about ways of implementing his ideas in my organisation.
And, of course, my life
Thank you

Write your own review or comment:

make sure you have javascript enabled or clear this field: