When the designers of modern technologies don’t understand our fallibility, they design new and improved systems for stock markets, insurance, education, agricul- ture or health care that don’t take our limitations into account (think “human-incompatible technologies,” and they are everywhere). As a consequence, we inevitably end up making mistakes and sometimes fail magnificently.
Behavioral economists want to understand human frailty and find more compassionate, realistic and effec- tive ways for people to avoid temptation, exert more self-control and ultimately reach their long-term goals. As a society, it’s extremely beneficial to understand how and when we fail and to design/invent/create new ways to overcome our mistakes. As we gain some understand- ing about what really drives our behaviors and what steers us astray — from business decisions about bonuses and motivation to the most personal aspects of life, such as dating and happiness — we can gain control over our money, relationships, resources, safety and health, both as individuals and as a society.
This is the real goal of behavioral economics: to try to observe the way we really operate so that we can more readily observe our biases, be more aware of their influ- ences on us and hopefully make better decisions. Although we might never become perfect decision mak- ers, an improved understanding of the multiple irrational forces that influence us could be a useful first step toward making better decisions. And we don’t have to stop there. Inventors, companies and policy makers can take the additional steps to redesign our working and living environments in ways that are naturally more compatible with what we can and cannot do.
In the end, this is what behavioral economics is about –– figuring out the hidden forces that shape our deci- sions, across many different domains, and finding solu- tions to common problems that affect our personal, busi- ness and public lives. Once you understand the way our human nature truly operates, you can decide how to apply that knowledge to your professional and personal life. G