"Small Miracles" Thanks To Behavioral Economics

Behavioral economics is once again recognized as a powerful component in policy-making. The New York Times published an Op-Ed article by David Brooks exemplifying the impacts of behavioral economics around the world. From Kenya to the U.S., “small miracles” were produced by focusing less on incentives and human reason and more on actual human behavior and how they can be used to influence everyday decisions.

Some examples of its success includes a sticker placed inside buses to encourage passengers to scream at dangerous drivers. Since then, car accident injuries and death fell to half in Kenya. In another example, the ACT college admissions test only allowed three lines for students to jot down their prospective colleges in the past. They have now added an additional fourth line, nudging students to apply to more schools. Since then, some students got into prestigious colleges they wouldn’t have otherwise, hence increasing their expected earning by $10,000.

“The old style was based on the notion that human beings are rational actors who respond in straightforward ways to incentives. The new style, which supplements but does not replace the old style, is based on the obvious point that human beings are not always rational actors,” wrote David Brooks.

Read Op-Ed article.