Thursday, June 11, 2020

A note on finishing 12 years of teaching undergraduate behavioural economics

I recently completed the final iteration of my undergraduate "Behavioural Economics and Public Policy" module at UCD. This course began in 2008. I had been a postdoc at the UCD Geary Institute and was teaching various modules in an adjunct capacity during 2005-2007. I became an assistant professor with a joint appointment at the UCD School of Economics and UCD School of Public Health in 2007. One of my main ambitions was simply to have some behavioural economics on the curriculum in Ireland. I developed the course through early 2008 and it was approved for delivery in the Spring of 2009 with the course code Econ30270. The course was run by me three times and then by Prof Kevin Denny from 2011 to 2016 (with his own structure). I gave the course again from 2017 to 2020. A similar course was also approved for delivery at TCD School of Psychology and ran in 2008 and 2010. I also taught what was essentially a version of this course to undergraduate economics students at Stirling University from 2012 to 2016. The ideas developed through the course were also very much part of the development of MSc programmes in Behavioural Science and Behavioural Economics in Stirling and UCD.

The basic overview of the module is below and the topics evolved a bit over the years. I have always had an interest in the history of economics and psychology and found it thrilling to teach a course like this in both TCD and UCD. One of Ireland's points of interest in the history of the disciplines is the work of TCD graduate FY Edgeworth who, among other things, developed indifference curve analysis and was a key figure in economics at the time where the disciplines of economics and psychology became separate. My own degree was a two-subject moderatorship in economics and psychology and I felt at the time that this was an attempt to bring the disciplines back together in a way that would be interesting for real-world applications. I have thought a lot about the different historical streams that have shaped the interaction of economics and psychology over the centuries but it is clear that the dominant influence on this course was the development of behavioural economics in the US that eventually led to the Nobel Prize awarded to Richard Thaler. The paradigm associated with his work clearly opened a space where a course like this could be integrated into a mainstream Economics programme and the readings and topics are heavily influenced by the atmosphere he created through the famous anomalies column in the Journal of Economic Perspectives and related works.
Module description The purpose of this course is to provide a senior undergraduate-level introduction to the principles of behavioural economics. The module aims to:
- Introduce students to core areas of economics and psychology such as judgement, rational choice, intertemporal decision making, and emotion-based decision-making.
- Enable students to develop a detailed understanding of the key concepts of behavioural economics.
- Provide a conceptual foundation to critically evaluate the role of behavioural economics ideas in public policy.
The course was divided into 8 blocks of lectures under the topic headings below. At the beginning of the course, no textbooks existed for behavioural economics, and the course mostly involved lectures around a set of key readings for each topic. 
1. Rational Choice Theory: What are the main concepts of rationality in economics? What is the nature of the debate about rationality in behavioural economics? 2. Judgement, Heuristics and Biases: How do people make judgements about risk and uncertainty? 3. Intertemporal Choice: What is the discounted utility model? Is it a reasonable descriptive model of intertemporal choice? What are the main alternatives? What is the cutting edge of research on how people making intertemporal choices? 4. Identity, Motivation and Incentives: How do factors such as fairness, social norms, and other related motivations influence economic decisions? How can such factors be studied experimentally and through other research designs? What are the potential implications for policy design? 5. Emotion and Decision Making: What is the role of emotional factors in economic decision making? We will outline classic models of "visceral effects" and demonstrate how such factors are studied. We will also examine the impact of a wide range of other emotions on economic behaviour and potential implications for public policy. 6. Well-being and economics: To what extent is consumption a good proxy for welfare and what role might measures of well-being play? This set of lectures will critically evaluate the extensive literature on well-being and economics.  7. Behavioural Economics, Consumption, and Regulation: This series of lectures will examine the interaction between firms and consumers in the presence of various behavioural factors. 8. Public Policy, Law and Behavioural Economics: This series of lectures will describe the wide-ranging debates about the role of behavioural economic in public policy. We will draw from the previous lectures to describe in detail the academic background to the public debates about the role of "Nudging" and similar policies and provide the conceptual and critical foundations to evaluate the role of such polices across many areas of public policy.  
The course was assessed in two main ways. Firstly, students completed an assignment or set of assignments asking them to firstly outline a set of main concepts from the readings, design an experiment that tested some aspect of these concepts, and finally to outline how some of the key concepts applied to a key area of public policy either directly addressed during the lectures or an area that the student was particularly interested in. The main form of delivery was lectures held in the UCD Newman lecture theatres. The early versions of the course involved lectures to approximately 80 students, with the later versions having over 200 students. The TCD and Stirling versions of the course had approximately 30 students per iteration.  

The reading list evolved over time but the key readings below are a good representation of the material covered. Many other papers were discussed during the lectures and the readings themselves were always fluent in terms of what was required versus optional. The lectures on intertemporal choice and on ethics evolved a lot in collaboration with Leonhard Lades, in particular the lectures on policy and ethics evolved as the field became increasingly involved in policy applications throughout the world. I had initially covered quite a bit of neuroeconomics in various lectures but found it increasingly challenging to cover this area seriously in the time constraints. I also attempted at various times to cover the history of economics and psychology but eventually decided to pursue this as a separate project and, while the course always retained a historical introduction, this was never really a formal part of the course. The textbooks by Angner and Wilkinson and Klaes also started to be part of the reading list over time but I kept the focus on reading journal articles and tailoring the lectures around these. However the teaching of behavioural economics evolves, many of the papers below remain brilliant documents to bring to students, and discussing this work in lectures will always be one of the highlights of my career. 
Topic 1:  Introduction, History of Economic Thought, and Rationality   1.    Rabin, M. (2002). “A Perspective on Psychology and Economics", European Economic Review, 46, 657-685.
2.      Rabin, M. (1998). “Psychology and Economics,” Journal of Economic Literature, 36, 11- 46.
3.      Kahneman, D. (2003) "Maps of Bounded Rationality: Psychology for Behavioral Economics." American Economic Review: 1449-1475.
4.      Beshears et al. (2008), How are Preferences Revealed, Journal of Public Economics
5.      The first three chapters of Wilkinson and Klaes provide a good basic overview of the main tenets of rational choice and their relevance for behavioural economics. Angner’s book is also a good undergraduate treatment for those looking for revision.
 Topic 2: Judgement, Biases, and Heuristics 1.      Kahneman & Tversky (1974), Judgment under Uncertainty: Heuristics and Biases, Science.
2.      Ariely, Loewenstein & Prelec (2004), “Coherent Arbitrariness”: Stable Demand Curves Without Stable Preferences, QJE
3.      Beshears et al. (2008), How are Preferences Revealed, Journal of Public Economics.
 Topic 3: Self-Control and Intertemporal Choice 1.      Benartzi & Thaler, Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving, Journal of Political Economy.2.      Hofmann, W., Baumeister, R. F., Förster, G., & Vohs, K. D. (2012). Everyday temptations: an experience sampling study of desire, conflict, and self-control. Journal of Personality and Social Psychology102(6), 1318.
3.      Hofmann, W., Friese, M., & Strack, F. (2009). Impulse and self-control from a dual-systems perspective. Perspectives on Psychological Science4(2), 162-176.
4.      Loewenstein, G. & O’Donogue, T. (2002), "Time discounting and time preference: a critical review", Journal of Economic Literature, 40: 351-401
5.      Elster, J. (1985). Ulysses and the Sirens: Studies in Rationality and Irrationality. Cambridge: Cambridge University Press.
6.      Fehr, E. (2002), "The economics of impatience", Behavioural Science, 415: 269-272.
7.      Madrian & Shea, The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior, Quarterly Journal of Economics.
 Topic 4: Emotion and Decision Making 1.      Elster (1984), Ulysses and the Sirens, Cambridge University Press.
2.      Elster (1996), Rationality and the Emotions, Economic Journal, Royal Economic Society.
3.      Elster (1998), Emotions and economic theory, Journal of Economic Literature.
4.      Glaeser (2005), The Political Economy of Hatred, The Quarterly Journal of Economics.
5.      Kahneman et al. (2006), Would You Be Happier If You Were Richer? A Focusing Illusion, Science.
6.      Loewenstein (1996), Out of control: visceral influences on behavior, Organizational Behavior and Human Decision Processes.
7.      Loewenstein (2000), Emotions in economic theory and economic behavior, American Economic Review.
8.      Sanfey et al. (2003), The Neural Basis of Economic Decision-Making in the Ultimatum Game, Science.
9.      Wilson & Gilbert (2003), Affective forecasting, Advances in Experimental Social Psychology.
 Topic 5: Identity, Motivation, and Incentives 1.      Akerlof & Kranton (2010), Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being.
2.      Fehr (2008), On the economics and biology of trust, JEEA.
3.      Fehr & Falk (2001), Psychological Foundations of Incentives, Schumpeter Lecture at the European Economic Association Meeting.
4.      Falk, Fehr & Fischbacher (2005), Driving Forces Behind Informal Sanctions, Econometrica.
5.      Falk & Kosfeld (2006), The Hidden Costs of Control, American Economic Review.
6.      Andreoni (1995), Cooperation in Public-Goods Experiments: Kindness or Confusion?, American Economic Review.
7.      Milgram (1963), Behavioral Study of Obedience, Journal of Abnormal and Social Psychology.
8.      Sacerdote (2001), Peer effects with random assignment: results for Dartmouth roommates, Quarterly Journal of Economics.
 Topic 6: Well-Being and Public Policy
 1.      Blanchflower (2008), International Evidence on Well-being, IZA Discussion Paper
2.      Brickman et al. (1978), Lottery Winners and Accident Victims: Is Happiness Relative? Journal of Personality and Social Psychology
3.      Daly & Wilson (2008), Happiness, Unhappiness, and Suicide: An Empirical Assessment, Working Paper
4.      Dolan et al (2008), Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-being, Journal of Economic Psychology
5.      Easterlin (1974), Does Economic Growth Improve the Human Lot? Some Empirical Evidence, Nations and Households in Economic Growth
6.      Easterlin & Angelescu (2009), Happiness and Growth the World Over: Time Series Evidence on the Happiness-Income Paradox, IZA Discussion Paper
7.      Goodman et al. (2011), The long shadow cast by childhood physical and mental problems on adult life, PNAS
8.      Knabe et al. (2010), Dissatisfied with Life but Having a Good Day: Time-use and Well-being of the Unemployed, The Economic Journal
9.      Hsee et al. (2008), Wealth, Warmth and Wellbeing, Journal of Marketing Science
10.  Kahneman et al. (2006), Would You Be Happier If You Were Richer? A Focusing Illusion ,Science
11.  Stevenson & Wolfers (2013), Subjective Well-Being and Income: Is There Any Evidence of Satiation?, American Economic Review
12.  Schkade & Kahneman (1998), Does Living in California Make People Happy? A Focusing Illusion in Judgments of Life Satisfaction, Psychological Science
13.  van Praag , Frijters & Ferrer-i-Carbonell (2003), The anatomy of subjective well-being, Journal of Economic Behaviour & Organization
14.  Wolfers (2003), Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing, NBER Working Paper
 Topic 7 Behavioural Economics, Consumption and Regulation
 8.      Akerlof, G. A., & Shiller, R. J. (2015). Phishing for phools: The economics of manipulation and deception. Princeton University Press.
9.      Armstrong, M., & Huck, S. (2010). Behavioral economics as applied to firms: a primer. Competition Policy International Journal, 3-45.
10.  Bar-Gill, O. (2012). Seduction by contract: Law, economics, and psychology in consumer markets. Oxford University Press.
11.  Gabaix, X., & Laibson, D. (2006). Shrouded attributes, consumer myopia, and information suppression in competitive markets. The Quarterly Journal of Economics, 121(2), 505-540.
12.  Vigna, S. D., & Malmendier, U. (2006). Paying not to go to the gym. The American Economic Review, 96(3), 694-719.
 Topic 8 Behavioural Economics, Ethics, and Public Policy
 1.    Delaney, L., and Lades, L., (2019).  “Nudge FORGOOD”.
2.    Sunstein & Thaler (2003), Libertarian Paternalism, American Economic Review.3.    Sunstein, C. R. (2015). The ethics of nudging. Yale J. on Reg., 32, 413.4.    Sunstein, C. R. (2014). Why Nudge?: The Politics of Libertarian Paternalism. Yale University Press.

Given I am unlikely to teach a course like this in the near future, and given also the fact that such courses are now far more common across universities, I wanted to at least mark the end of this period of teaching with some reflections. In total, approximately 1000 students took different versions of this course. Student evaluations are a very noisy signal but I received a lot of positive messages over the years from students who enjoyed this material a lot, and I am still in contact with several students who integrated aspects of the course into their career plans.

1. The first thing I would say is that there was a remarkable novelty in teaching this type of material in the first few years. Only a handful of top departments offered modules in this area. It was relatively obvious to the students that I was very passionate about the area and there was generally a sense of excitement and enthusiasm about integrating this area into their degrees. In the last few iterations, it was no longer the case that behavioural economics was a particularly new area and a lot of the "buzz" around the topic arose from novel applications rather than the course itself being novel. But in general, the atmosphere around these lectures was very positive.

2. The policy aspects of the course intensified a lot over time. The course was conceived shortly before the book "Nudge" was published. I had already intended to discuss Libertarian Paternalism and associated ideas in lectures but it was remarkable how ideas that felt like exciting academic seminar material suddenly became ones that were being discussed by the British Prime Minister and American president, and actively becoming part of regulatory agencies across the world.

3. Related to this, ethical aspects of practice evolved as an increasing part of the course over the years. In the earliest versions, it seemed very clear that behavioural economics offered a useful corrective to a narrow insistence on rational choice models in areas like pensions where they clearly needed to be supplemented by empirical evidence on how people make choices. However, increasingly the course began to discuss the institutional context of how such evidence could be applied and the potential for misuse of such evidence. I hope we got the balance right but the overall aim was to bring students into a debate where intelligent people could disagree. I regularly "role-played" the perspective of various debate participants and encouraged students to see different sides of complex debates.

4. Another aspect that began to loom large during the development of the course was the replication crisis. My lectures had always encouraged students to think critically about how findings derived often from small samples of students in particular places at particular times might be limited when developing widespread public policy applications. In general, I hope students would testify that our lectures always debated the limits of different literatures and I think any course that connected behavioural research to policy should encourage critical reading among the students and get them to have a sense of the difference between evidence and dogma.

5. The demarcation of different disciplines also became an increasingly important theme. When the course started, the main use of the phrase "behavioural economics" referred basically to the work of a group of top mainly US-based academics who were challenging neo-classical assumptions in economics. However, after the publication of Nudge and the huge increase in interest among policy-makers and regulators, it was increasingly clear that part of what was happening was an increased awareness of a wide set of literatures from psychology and cognate disciplines. This has increasingly been referred to as behavioural science, which itself is a term with many historical roots. We have integrated these development in many ways in evolving MSc programmes, including having dedicated courses on psychology for economics students, and developing interdisciplinary modules.

6. Many of my students over the years now work on areas relevant to the course material and it is fascinating to hear perspectives from them years after doing the course. I have been able to bring several former students who are now working on these areas back to speak to various groups of students and welcome any correspondence from former students still thinking about these areas.

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