All of us at Ethical Systems extend a hearty congratulations to Richard Thaler on the announcement of his Nobel Prize for his pioneering research around nudging.
From The New York Times announcement:
The Nobel committee, announcing the award in Stockholm, said that it was honoring Professor Thaler for his pioneering work in establishing that people are predictably irrational — that they consistently behave in ways that defy economic theory. People will refuse to pay more for an umbrella during a rainstorm; they will use the savings from lower gas prices to buy premium gasoline; they will offer to buy a coffee mug for $3 and refuse to sell it for $6.
The committee credited Professor Thaler, who teaches at the University of Chicago Booth School of Business, for moving economics toward a more realistic understanding of human behavior, and for using the resulting insights to improve public policies, notably a sweeping shift toward the automatic enrollment of employees in retirement savings programs.
Scott Killingsworth, Senior Counsel with Bryan Cave, LLP, writes a broadly applicable and thought-provoking piece on nudges vs. culture. Killingsworth illustrates how a strong ethical culture can take the place of consistent, ongoing nudges and shows that culture should be considered through the lens of not just preventing ethical mishaps, but also about creating a positive environment “where the good apples can thrive”.
As we have long said, behavioral sciences are the key to unlocking better decision making, from study halls to the halls of power. This week, the White House echoed our view via an Executive Order outlining that behavioral insights be used to better serve the American people. What began as a nudge, is now a full-on push.
Ethical Systems praises this initiative as a major step towards not only making behavioral science more widespread but also in advancing the incorporation of ethical system design in business. When businesses adopt these systems, research shows their employees are happier, more productive and, as a result, the business is more profitable.
What do economics, psychology, and experimental science have in common? As Richard Thaler implies in Misbehaving: The making of behavioral economics, most economists would say little to none — but this couldn’t be further from the truth. Misbehaving is, first and foremost, a story of how modern economics, finance, and theoretical analysis have become increasingly specialized and narrow without substantial practical value. Utilizing empirical studies and anecdotes, funny stories, and even some jokes, Thaler persuades the reader that behavioral studies — or psychology-motivated disciplines which focus on humans, not mythical rational agents — are here to stay.
Margaret Heffernan's new book "Beyond Measure: The big impact of small changes," is an original manifesto for business leaders. Creating strong organizational cultures does not require multi-million dollar programs; instead, small actions by each employee- from Custodian to CEO- matter more and have the biggest impact.