Economists are often reminded by well-meaning friends and strangers that economics is flawed for assuming people are rational when they’re not. It’s not always clear what these skeptics mean by rational — often it’s a propensity for making bad decisions. And there’s truth in that. People struggle to make sense of probabilities, especially in the midst of uncertainty. Just look at the difficulty most people have had understanding the effectiveness of Covid-19 vaccines.
We humans also tend to exaggerate remote risks and ignore more likely events. Even when we accurately assess risk, sometimes we procrastinate doing what’s in our best interest or make snap decisions we regret later.
But generally, the idea we could nudge people to make better choices by exploiting their behavioral biases was always oversold. It’s hard to persuade people to do something they don’t want to do, especially when you don’t fully understand their unique motives. And if data isn’t presented clearly and honestly, attempts to nudge people can be self-defeating when they don’t trust you.
Author(s): Allison Schrager
Publication Date: 27 August 2021
Publication Site: Bloomberg