The simple things matter, like behavioral economics

It turns out that my random decisions are not so random, rather highly predictable  and easily influenced.  And I am not alone.  Behavioral economics has unraveled a whole new world of understanding people's actions, and provided compelling evidence to break-down some of the stagnant or ineffective structures/policies/ideologies that have persisted for so long.  

Much of the best anti-poverty work is using behavioral economics to help people make lasting changes.  As we have gotten deeper into developing our budget coaching program for lower-income families -- Smart About Money (SAM) -- what at first seemed like a relatively simple program design has evolved as we work to incorporate the best new thinking from the field.  There are many simultaneous forces stretching our work -- science, technology, economics -- in ways I wouldn't have predicted just a few years ago.  

David Brooks, Op-Ed Columnist at the New York Times, wrote about the importance and possibility of applying behavioral economics to our society's toughest problems in his July 7, 2011 piece, "The Unexamined Society."  

"We have two traditional understandings of poverty. The first presumes people are rational. They are pursuing their goals effectively and don’t need much help in changing their behavior. The second presumes that the poor are afflicted by cultural or psychological dysfunctions that sometimes lead them to behave in shortsighted ways. Neither of these theories has produced much in the way of effective policies. Eldar Shafir of Princeton and Sendhil Mullainathan of Harvard have recently, with federal help, been exploring a third theory, that scarcity produces its own cognitive traits. ... Poorer people have to think hard about a million things that affluent people don’t. They have to make complicated trade-offs when buying a carton of milk: If I buy milk, I can’t afford orange juice. They have to decide which utility not to pay. These questions impose enormous cognitive demands. The brain has limited capacities. If you increase demands on one sort of question, it performs less well on other sorts of questions..."

The connection he describes between cognition and poverty is astounding -- and rings true.  Now the challenge is to put it to work to find new ways to support people and fix systems.