Click to listen to Chris’s conversation with Cass Sunstein (30 minutes, 14 mb mp3)

Cass Sunstein gives us the half-hour short course here on “the most exciting intellectual movement of the last thirty years” — behavioral economics, that is, of which we had a taste recently with George Lakoff and Dan Ariely.

Behavioral economics is the demonstration (by clinical psychology, affirmed by neuroscience) that the “rational man” of neo-classical economics is in fact, in Dan Ariely’s book title, Predictably Irrational — that we are eternally kidding ourselves in our choice of credit cards, or of diets and desserts; that we tend to lurch without much reflection from over-optimism to over-anxiety about terrorist threats, war risks, and environmental melt-downs. Cass Sunstein is himself a demonstration of the spread of the new thinking from psychology and economics to law and politics. From the University of Chicago Law School, where he taught alongside Barack Obama for a dozen years, he has just moved permanently to Harvard, where he and Obama seem still to be channeling each other. Sunstein’s new book Nudge, with the economist Richard Thaler, is an introduction to a variety of not-quite-coercive strategies for helping people get what they really want: 401k savings plans, for example, that would be automatic for all workers who didn’t choose to set some of their wages aside. The general trick, Sunstein says, is recognizing that there’s less Immanuel Kant, more Homer Simpson, in each and all us than we’ve been taught.

This started with psychology. Two Israelis Daniel Kahneman and Amos Tversky did a bunch of amazing experiments in the 1970’s where they said people use some mental shortcuts in trying to think about risk. If a recent event, for example, is in your head, say it involves a crime or a misfortune or something wonderful happening, then you will think it’s really probable that the crime or the misfortune or the wonderful thing will happen. This way of thinking migrated first into economics. There has really been a revolution in economic thinking because economists are trying to do their work with a realistic rather than artificial sense of what human beings are like. The idea is that we can do economics with Homer Simpson as our types rather than doing economics with computers as our types. People just aren’t computers. When Homer, in one episode, went to buy a gun, the gun owner told him that him that there is a three day waiting period. And Homer responded: “What? Three Days? I’m angry now!” So that captures people’s passion and focus on the short term, and it also captures how law and policy can help a lot.

Harvard Law Professor Cass Sunstein in conversation with Chris Lydon, August 21, 2008.