Psychology and public policy

I had heard of the book Nudge, but this report on NPR gave it new resonance. Here's some excerpts from the story:

Cass Sunstein, President Obama's pick to head the Office of Information and Regulatory Affairs, is a vocal supporter of the program, because it's an economic policy that shapes itself around human psychology. Sunstein is just one of a number of high-level appointees now working in the Obama administration who favors this kind of approach.

All are devotees of behavioral economics — a school of economic thought greatly influenced by psychological research — which argues that the human animal is hard-wired to make errors when it comes to decision-making, and therefore people need a little "nudge" to make decisions that are in their own best interests.

And that is exactly what Obama administration officials plan to do: By taking account of human psychology, they hope to save you from yourself.

This is the story of how obscure psychological research into human decision-making first revolutionized economics and now appears poised to remake the relationship between the government and its citizens.

[ . . .]

The ideas that underlie the Obama administration's approach to social policies got their start in 1955 with Daniel Kahneman.

[ . . .]

Kahneman was surprised by the pure visceral power of his own certainty. He eventually coined a phrase for it: "illusion of validity."

It's a problem that afflicts us all, says Kahneman, who won the 2002 Nobel Prize in economics for his work on this subject. From stockbrokers to baseball scouts, people have a huge amount of confidence in their own judgment, even in the face of evidence that their judgment is wrong.

But that mistake is just one of many cognitive errors identified by Kahneman and his frequent collaborator, psychologist Amos Tversky. For more than a decade, the two worked together cataloging the ways the human mind systematically misjudges the world around it.

. . . if the ideas of Kahneman and Tversky had simply stayed in the realm of academic psychology, there wouldn't be much of a story to tell.

The economist Richard Thaler, frequently mentioned as a contender for a Nobel, was the one who integrated Kahneman and Tversky's ideas about human irrationality into economics.