Department of Economics Course: Applied Behavioral Economics and Public Policy

Department of Economics

Course: Applied Behavioral Economics and Public Policy (ECON 6295, section 11), a.k.a., “Economics in Theory and Practice: A Somewhat Irreverent View”

Semester: Fall 2017

Time: Monday, 6:10-8:40 pm

Location: GOV 104

710 21^st St., NW

INSTRUCTOR

Name: Dr. Diane Lim

Work Address: The Conference Board, New York (local office in Arlington/Rosslyn)

Campus Address: Department of Economics

2115 G St., NW

Washington, DC 20052

Phone: (cell) 703-470-1357

E-mail: [e-mail] (note, *not* “dlim”) or [e-mail]

Twitter: @EconomistMom

Office hours: immediately after class, or by appointment

COURSE DESCRIPTION

This course will first discuss/review the fundamentals of microeconomic and macroeconomic theory at an intermediate level and then critique where theories have failed to accurately explain or predict real-world behavior, motivating the more recent interdisciplinary "behavioral economics" approach. Can economists stray from the "one size fits all" approach and yet still have enough of a theoretical foundation to be able to predict economic outcomes?  Students will compare and contrast traditional vs. behavioral economics research applied to a variety of public policy issues.

COURSE PREREQUISITE(S)

Intermediate-level microeconomic theory, intro-level macroeconomics

TEXTS

Textbook (required):

• 
  Edward Cartwright, Behavioral Economics (Routledge Advanced Texts in Economics and Finance), 2^nd Edition (2014)
  
• 
  Companion website with student resources (quizzes, flashcards, review question answers)
  

Additional books to be drawn from (* are required)

• 
  *Dan Ariely, Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions (2010)
  
• 
  *Daniel Kahneman, Thinking, Fast and Slow (2011, paperback 2013)
  
• 
  *Katrine Marçal, Who Cooked Adam Smith’s Dinner? A Story of Women and Economics (2016)
  

• 
  Dani Rodrik, Economics Rules: The Rights and Wrongs of the Dismal Science (2015)
  
• 
  Richard Thaler, Misbehaving: The Making of Behavioral Economics (2015) – retrospective on how the field has developed since the 1970s
  
• 
  George Akerlof and Robert Shiller, Phishing for Phools: The Economics of Manipulation and Deception (2015) – a critical perspective on how the capitalist system can “fool” our society into outcomes detrimental to our personal and collective well-being
  

Resources on public policy applications:

• 
  William J. Congdon, Jeffrey R. Kling, and Sendhil Mullainathan, Policy and Choice: Public Finance Through the Lens of Behavioral Economics (2011)
  
• 
  Cass R. Sunstein, The Ethics of Influence: Government in the Age of Behavioral Science (2016)
  
• 
  Executive Office of the President, Social and Behavioral Sciences Team, Annual Report (September 2015) and 2^nd Annual Report (September 2016)
  
• 
  W. Kip Viscusi and Ted Gayer, “Behavioral Public Choice: The Behavioral Paradox of Government Policy,” working paper, Mercatus Center of George Mason University (March 2015)
  
• 
  Raj Chetty, “Behavioral Economics and Public Policy: A Pragmatic Perspective,” National Bureau of Economic Research working paper 20928 (February 2015)
  

Students should also have a good, intermediate microeconomics book as reference:

(such as) Walter Nicholson and Christopher Snyder, Microeconomic Theory: Basic Principles and Extensions, 11^th ed. (2011)

“Listening List”

• 
  “The Hidden Brain” – NPR podcast series by Shankar Vedantam
  
• 
  “Freakonomics” Radio
  
• 
  “Planet Money” – another NPR podcast series w/ some behavioral econ stories
  

Online Resource (follow on Twitter and sign up for their free weekly email newsletter): Behavioral Science and Policy Association
LEARNING OUTCOMES:

As a result of completing this course, students will be able to:

1. 
   Understand the predictive value of traditional economic theories, yet also identify where traditional theories of the rational, fully-informed economic agent fail to adequately explain the behavior of individuals and groups;
   
2. 
   Evaluate the merits of alternative private-market mechanisms and public policies, given the responses of individuals to price signals vs. other non-market “cues”/“nudges”;
   
3. 
   Seek out opportunities and design methodological strategies for research that better and further utilizes “big data” and interactive formats to understand more about what drives individual- and family-level decisions;
   
4. 
   Write and present/speak effectively on these topics, recognizing different audiences.
   

ANTICIPATED HOURS of WORK

Over the course of the semester, students will spend approximately 2.5 hours (150 minutes) per week in class; there are 14 class meetings. Required reading for the class meetings and written response papers or projects are expected to take up, on average, 7 hours (350 minutes) per week. Thus, over the course of the semester, students will spend approximately 35 hours in instructional time and 105 hours preparing for class.

GRADING

• 
  Weekly assignments (summaries of readings, review questions, talking points for class) that you will email to professor before class begins; these are checked mostly for completion (credit/no-credit) rather than graded: total of 20%
  
• 
  Work related to the Term Paper—on a public policy or business practice application of behavioral economics—counts for total of 50%, as follows:
  
  • 
    Early in semester, (abstract-length) written proposal of term paper topic: 10%
    
  • 
    Late in semester, (15-min) presentation to class of your research on your paper in progress: 10%
    
  • 
    Written term paper (approximately 10-15 pages double-spaced with any tables/charts, or around 2500 words) due on the last day of class: 30%
    
• 
  A final assignment/analysis/take-home exam to be completed during finals week (over a 2-hour period): 20%
  
• 
  Overall class participation (contributions to classroom and online discussions): 10%
  

UNIVERSITY POLICY ON RELIGIOUS HOLIDAYS

1. Students should notify faculty during the first week of the semester of their intention to be absent from class on their day(s) of religious observance;

2. Faculty should extend to these students the courtesy of absence without penalty on such occasions, including permission to make up examinations;

3. Faculty who intend to observe a religious holiday should arrange at the beginning of the semester to reschedule missed classes or to make other provisions for their course-related activities.

For GW’s teaching policies, see http://www.gwu.edu/~academic/Teaching/main.htm
ACADEMIC INTEGRITY

I personally support the GW Code of Academic Integrity. It states: “Academic dishonesty is defined as cheating of any kind, including misrepresenting one's own work, taking credit for the work of others without crediting them and without appropriate authorization, and the fabrication of information.” Please note that allowing another student to copy your work is defined as cheating under the Academic Integrity code.

Common examples of academically dishonest behavior include, but are not limited to

1. 
   Cheating
   
2. 
   Fabrication
   
3. 
   Plagiarism
   
4. 
   Falsification and forgery of University academic documents
   
5. 
   Facilitating academic dishonesty
   

Sanctions range from failure of the assignment, to failure of the course, to suspension or expulsion from the University. For the remainder of the code, see: http://www.gwu.edu/~ntegrity/code.html

SUPPORT FOR STUDENTS OUTSIDE THE CLASSROOM

DISABILITY SUPPORT SERVICES (DSS)

Any student who may need an accommodation based on the potential impact of a disability should contact the Disability Support Services office at 202-994-8250 in the Marvin Center, Suite 242, to establish eligibility and to coordinate reasonable accommodations. (Students must make arrangements with the DSS office well in advance of needing to use the service.)

UNIVERSITY COUNSELING CENTER (UCC) 202-994-5300

The University Counseling Center (UCC) offers 24/7 assistance and referral to address students' personal, social, career, and study skills problems. Services for students include:

• 
  crisis and emergency mental health consultations
  
• 
  confidential assessment, counseling services (individual and small group), and referrals
  

COURSE PLAN/TIMELINE and READING ASSIGNMENTS

Note: other readings will be added from week to week as we go along. The best way to keep up with reading assignments is to check Blackboard regularly.
August 28: Introduction – What Is Behavioral Economics?

• 
  Chapter 1 in Cartwright
  
• 
  Richard Thaler’s AER article, July 2016, “Behavioral Economics: Past, Present, and Future”
  
• 
  Ariely book (start reading and try to finish over first few weeks of class). It is a lighter and fun read and a good sampling of how the “behavioral” field deviates from traditional economic theory.
  

September 4: NO CLASS (Labor Day)
September 11 and 18: Rational “Homo Economicus” vs. Real-World Homo Sapiens

• 
  Chapter 2 in Cartwright (“simple heuristics” in decisionmaking)
  
• 
  Kahneman’s distinction between “thinking fast” (”system 1”) and “thinking slow” (“system 2”) (start reading through the chapters in “Parts” 1 and 2)
  
• 
  Ariely book (his examples of “irrational” yet predictable behavior), esp. chapters 1, 2, 3; 8-11.
  
• 
  (optional) Ashraf, Camerer, and Loewenstein (2005), “Adam Smith, Behavioral Economist,” J. of Economic Perspectives (full pdf paper on Blackboard)
  
• 
  Check for examples posted on Blackboard
  
• 
  Listen to Hidden Brain, episode 42 (8/23/16): Dan Gilbert, “Decide Already!”
  

Written Paper Proposals due September 18
September 25: Dealing with Risk

• 
  Chapter 3 in Cartwright (“choice with risk”)
  
• 
  Chapters from “Part 4” of Kahneman on “Choices” (pgs. 269-374)
  
• 
  (optional) Kahneman, Knetsch, and Thaler (1991) “Anomalies” paper (J. Econ. Perspectives) and Komlos (2015) on “Behavioral Indifference Curves” – full papers both posted on Blackboard
  
• 
  (optional) Imas paper on realized vs. paper losses, American Economic Review 8/2016 (pdf of full paper posted on Blackboard); WSJ story
  
• 
  Planet Money podcast on “The Risk Farmers,” episode 723 (9/7/16); here is NPR morning edition short form
  

October 2: Foresight and Planning Horizons

• 
  Chapter 4 in Cartwright (“choosing when to act”)
  
• 
  Chapter 7 in Ariely
  
• 
  (More from) Part 4 in Kahneman
  
• 
  Supplemental survey pieces posted on Blackboard (all co-authored by Oleg Urminsky of U. Chicago Booth School)
  
• 
  (skim) Angela Boatman, Brent Evans, and Adela Soliz (2014), “Applying the Lessons of Behavioral Economics to Improve the Federal Student Loan Programs: Six Policy Recommendations,” Lumina Foundation (pdf here and posted on Blackboard)
  
• 
  (skim) Melissa A.Z. Knoll (2011), “The Role of Behavioral Economics and Behavioral Decision Making in Americans’ Retirement Savings Decisions,” Society of Actuaries (pdf here and posted on Blackboard)
  
• 
  (skim) John A. Turner (2013), “Using Behavioral Economics to Encourage Annuitization by 401(k) Participants and IRA Holders,” Benefits Quarterly (pdf here and posted)
  

October 9: NO CLASS (fall break)
October 16: Processing Information (under Uncertainty)

• 
  Chapter 5 in Cartwright (“learning from new information”)
  
• 
  Part 4 in Kahneman, continued
  

October 23: Interacting with Other (Real) People

• 
  Chapter 6 in Cartwright (“interacting with others”)
  
• 
  Chapters in “Part 3” in Kahneman
  
• 
  Gary Charness and Matthias Sutter (2012), “Groups Make Better Self-Interested Decisions,” J. of Economic Perspectives (full paper on Blackboard)
  

October 30: Caring about Other People (Altruism, Interdependent Utility)

• 
  Chapter 7 in Cartwright (“social preferences”)
  
• 
  Chapters 4-6 in Ariely
  
• 
  Francesca Gino, Michael I. Norton, and Roberto A. Weber (2016), “Motivated Bayesians: Feeling Moral While Acting Egoistically,” J. of Economic Perspectives (full paper on Blackboard)
  

November 6: The Women’s Perspective (Feminist Economics)

• 
  Marçal book
  

November 13: A Deeper Dive into the Origins of Behavior (& What Makes Us Happy?)

• 
  Chapters 8-10 in Cartwright
  
• 
  Chapters 35-38 in Kahneman (“Part 5”)
  
• 
  Daniel Kahneman and Alan Krueger (2006), “Developments in the Measurement of Subjective Well-Being,” J. of Economic Perspectives (full paper on Blackboard)
  
• 
  OECD’s “Better Life Index”
  

November 20, 27, and December 4: Deeper Dive into Specific Business and Policy Applications (presentations of your paper topics during this period)

• 
  Chapter 11 in Cartwright
  
• 
  Selections from books and articles listed up top (resources on public policy applications)
  
• 
  Review of Cass Sunstein’s new (2016) book (The Ethics of Influence) in the New Republic
  
• 
  Saurabh Bhargava and George Loewenstein (2015), “Behavioral Economics and Public Policy 102: Beyond Nudging,” American Economic Review: Papers & Proceedings (full paper on Blackboard)
  

December 11: Wrap-Up/Last Class (papers due, set up final exam shifts)
December 12-21: Final Exam Period (take-home exam, choice of early or late shifts)

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