The Harris Behavioral Insights Team
As they introduce nudges to the realm of parenting, Ariel Kalil and Susan Mayer are innovatively applying behavioral science to child development policy. The two scholars are joined by a growing cohort of Harris colleagues who are also testing the relationship between economics, policy and behavior, taking a microscope to the factors behind seemingly irrational decision-making.
Three-quarters of Americans overpay their income taxes, effectively giving the government a zero-interest loan. One sensible explanation for such a suboptimal decision could be “inertia,” Jones hypothesized in a 2012 paper. “But that’s a very loaded term,” he warns. “Because if you don’t know someone’s full story, you never know if it’s truly a suboptimal choice.” For example, some economists argue that people use tax refunds to force themselves to save money. Whether or not it’s true, the theory illustrates that the line between behavioral and neoclassical approaches is generally fuzzy, he says. “You can always rationalize if you tell a long-enough, convoluted-enough story.”
When interest rates plummeted following the 2008 financial crisis, homeowners had the perfect opportunity to refinance. Yet according to a recent working paper co-authored by Keys, an alarming 20 percent of households for whom it would have been “optimal and feasible” failed to refinance, leaving an average of $11,500 on the table. Keys found that many mortgage holders didn’t understand their options or were afraid to sign a fraudulent or manipulative agreement. Pinpointing psychological barriers and finding ways to get rid of them is imperative, he emphasizes. “A lot of times, people for whom psychological barriers are highest are also the people who need help the most.”
For many car buyers, calculating the benefits of energy efficiency may not be worth the hassle, Sallee theorized in a working paper last year. Anything that simplifies the process should help people make smarter choices – except that’s not happening. The EPA has mandated new energy efficiency labels, but “those labels are not terribly well designed,” says Sallee. “There’s really a shocking lack of research on labels themselves, as to exactly how effective they are at informing consumers and influencing choice.” Besides, no single label can give everyone the information that’s relevant to them. “And information about energy efficiency only matters if it’s going to cause them to change their minds.”
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