One of society's thorniest problems is that children from poor families start school lagging badly behind their more affluent classmates in readiness.
— Richard Thaler
It makes sense for social scientists to become more involved in policy because many of society's most challenging problems are, in essence, behavioral.
When it comes to assessing the chances of some complicated combination of events, gut feelings are pretty much useless.
If there is one thing that most economists agree about in the realm of tax policy, it is that it's best to broaden the base of any tax, all else being equal. That means minimizing the number of deductions and exclusions from taxable income in order to lower marginal rates and reduce distortions.
People are less likely to think it's immoral to walk away from their home if they know others who have done so. And if enough people do it, the stigma begins to erode.
You can't make evidence-based policy decisions without evidence.
As a general rule, the United States government is run by lawyers who occasionally take advice from economists. Others interested in helping the lawyers out need not apply.
As every successful parent learns, one way to encourage good behavior, from room-cleaning to tooth-brushing, is to make it fun. Not surprisingly, the same principle applies to adults. Adults like to have fun, too.
Leaders are important but not omnipotent.
Everyone knows it's dangerous to ingest gasoline or to inhale its fumes. But I am starting to believe that merely thinking about the price of gasoline can damage cognitive processing.
If the government can manage to collect and release personal information in a secure and useful way, so can private companies, which will empower consumers to become better shoppers.
If no estate tax is imposed, capital gains taxes can be avoided indefinitely.
Academia does not provide many opportunities for immediate gratification. You work for two years on a project, it takes two more years to get it published, and then you start hoping someone might read it.
I am all for trying to teach household finance in schools, starting as early as possible. And when it comes to high school, I think learning about compound interest is at least as important as trigonometry or memorizing the names of all 50 state capitals.
There's a reason why start-ups, especially disruptive start-ups - like Google or Amazon or Uber - are full of young people. That's because young people are not as wedded to the old fashioned ways of doing things.
We could all use more coaching.
Coining a term is not the same as creating a field!
Parents want their children to excel, callers to a victims' hot line want help, and sick people want to get well. Offering aids is like providing an alarm clock: it may help people get to an appointment on time, but no one is forcing them to use it.
Most of us think that we are 'better than average' in most things. We are also 'miscalibrated,' meaning that our sense of the probability of events doesn't line up with reality. When we say we are sure about a certain fact, for example, we may well be right only half the time.
I don't think it says anywhere in the Bible that tithing should be calculated on a before-tax basis.
It's hard to have any idea of how much money is enough to finance an appropriate lifestyle in retirement. But if a lump sum is translated into a monthly income, it's much easier to determine whether you have enough put away to afford to stop working.
Morality aside, there are other factors deterring 'strategic defaults,' whether in recourse or nonrecourse states. These include the economic and emotional costs of giving up one's home and moving, the perceived social stigma of defaulting, and a serious hit to a borrower's credit rating.
If you want to encourage some activity, make it easy.
If governments want to encourage good citizenship, they should try making the desired behavior more fun.
Demanding that the rich get a tax cut as a condition for tax relief for others is simply elitist.
The voting public is not very good at attributing credit and blame to presidents. They get too much credit when things go well and too much blame when things go badly. The same applies to coaches, C.E.O.'s, parents, and anyone else in charge.
Even a mother - Jewish or not - can't worry about everything. So it is important that we limit our worries to real as opposed to imaginary risks.
Here is a guiding principle: If a business collects data on consumers electronically, it should provide them with a version of that data that is easy to download and export to another Web site.
The wealth in many large estates has never been taxed because it is largely in the form of unrealized - therefore untaxed - capital gains.
High school seniors should receive help in how to think about a student loan and how to make sure that the education bought with the loan offers good prospects for repayment.
Even if we grade on a very generous curve, many Americans flunk when it comes to financial literacy.
The lesson for businesses is you are dealing with real people. Those are your customers, those are your employees, those are your bosses, and the better you understand how real people tick, the more successfully you will be able to accomplish your goals.
For amateur golfers, I think one of the biggest mistakes is to model their play on professionals.
It is true that I am one of the co-authors of 'Nudge,' and I am a behavioral economist, but it does not mean that everything we write about in that book is behavioral economics, nor does it mean that my co-author, the distinguished legal scholar Cass Sunstein, is a behavioral economist.
One reason for high health care costs is that patients fail to follow their treatment regimen.
Pundits are no better at forecasting election outcomes than they would be at predicting the final path of a hurricane. Smart pundits should consider either abandoning this activity or consulting with the geeks before rendering their guesses.
If we think that high marginal tax rates are bad because they distort incentives, the same is then true for tax subsidies.
Shopping for an annuity with hundreds of thousands of dollars at stake can be daunting, even for an economist.
How can government reduce the frequency and the severity of future catastrophes? Companies that have the potential to create significant harm must be required to pay for the costs they inflict, either before or after the fact. Economists agree on this general approach. The problem is in putting such a policy into effect.
The government employs scientists of many varieties in technical capacities, from estimating the environmental toxicity of a chemical to the structural soundness of a bridge. But when it comes to forming policies, these scientists and, especially, behavioral scientists are rarely at the table with the lawyers and the economists.
Lotteries are just one way to provide positive reinforcement. Their power comes from the fact that the chance of winning the prize is overvalued.
Tax cuts are one of many ways to stimulate the economy. Building infrastructure, for example, is another.
Although the United States cannot unilaterally lower the price of oil, it can reduce its consumption by using oil more efficiently and by developing alternative sources of fuel.
The ability of businesses to monitor our behavior is already a fact of life, and it isn't going away. Of course we must protect our privacy rights. But if we're smart, we'll also use the data that is being collected to improve our own lives.
Companies are accumulating vast amounts of information about your likes and dislikes. But they are doing this not only because you're interesting. The more they know, the more money they can make.
Arthur Laffer's idea, that lowering taxes could increase revenues, was logically correct. If tax rates are high enough, then people will go to such lengths to avoid them that cutting taxes can increase revenues. What he was wrong about was in thinking that income tax rates were already so high in the 1970s that cutting them would raise revenues.
In some ways, the finding that financial education doesn't provide long-term payoffs is hardly surprising. After all, how much do you remember from your high school chemistry class? Unless you use chemistry at work, you probably don't recall much about ionic bonding.
People make just as many mistakes when the stakes go up, maybe more.
I have an agent, John Brockman, who is an agent to many academic authors like Dan Gilbert and Steven Pinker, and he's very good at conning academics into writing books. He pulled this trick on me.
You go out on the practice range, and something kind of clicks, and you start hitting the ball very crisply. And you're sure that you've found it, the holy grail - that all you have to do is hold your hand in a certain way. Then you go out on the golf course, and it's completely disappeared.
