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Boom and bust

Will Kherbek
art critic
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piqer: Will Kherbek
Saturday, 16 March 2019

Creating A Smart Decision-Making Environment: The Role Of Decision Science In Economics And Policy

From literature to economics, the Humanities have long been dedicated to exploring the ways in which humans make decisions. Only recently, however, has the science of decision-making itself become a subject of serious study.

In this episode of Office Hours, a podcast produced by the Belfer Centre, the science and international affairs institute of Harvard's Kennedy School of Government, presenter Aroop Mukharji speaks to a pioneer in the field of decision science, Professor Jennifer Lerner. Lerner positions the field as sitting at the intersection of economics and psychology, or as she puts it later in the programme, "where the workings of the brain meet the world."

Lerner is particularly interested in the role emotion plays in decision-making. Arguing against the over-simplistic economic view of human beings as "rational actors" fully cognisant of their reasons for making choices, and the pretensions of B.F. Skinner's behaviourism, which posited a simple stimulus-response dynamic to explain human behaviour, Lerner argues that decision science is impossible to understand without factoring emotion into the process. This is, she notes, at present an inexact science. 

To illustrate this crucial topic in contemporary social science, Lerner provides a description of key ideas from the field. These include the so-called "endowment effect" wherein once a person owns something, they see it as being more value than when they are considering purchasing it, and the notorious "sunk cost trap" in which individuals waste time and energy on losing propositions for the very reason that they've already wasted lots of time and energy on that same proposition.

This being the Kennedy School, the policy aspect of this research is central to her work. Lerner argues that the key challenge for leaders is to create 'decision environments' conducive to producing good choices. Looking at the world, one can only hope her research finds a wider audience. And the sooner the better.  

Creating A Smart Decision-Making Environment: The Role Of Decision Science In Economics And Policy
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