nudging the economists (guest post by juan pablo pardo-guerra)

It is the best of prizes. It is the worst of prizes. Let me focus on the latter.

On Monday, the renowned behavioral economist Richard Thaler was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel Prize in Economics. For the Washington Post, the award made “economics more human—and real”. For The Atlantic, it was a much-deserved recognition for someone whose “career has been a lifelong war on Homo economicus”. There may be much to celebrate, but there is even more to ponder.

Thaler’s award speaks to three problems in economics and its relation to the ‘real world’ it inhabits. Firstly, it is disparaging that the prize recognizes research showing “that people can be influenced by [mostly social] prompts to alter their behavior” given that other sections of the social sciences have been doing this for, well, just about forever (e.g. seems there was this French dude called Gabriel Tarde…). This year’s Nobel Prize was as much a recognition of behavioral economics within the intellectual firmament of the discipline as a legitimation of economic imperialism: a finding is only truly relevant if published by an economist (corollary: being an economist from Chicago helps).

This year’s Nobel Prize is problematic for a second reason. Behavioral economics does not seem to be in the same league as the politically troublesome contributions of some of the more controversial previous laureates (think: Milton Friedman or Robert Lucas), but as a matter of fact, it sort of is. Though it might make economics “more human—and real”, the behavioral turn doesn’t make away with the ontological commitments of discipline, privileging market processes and individual action as the fundamental sources of virtue. Consider the metaphor of the ‘nudge’, central to the type of applied behavioral economics that made Thaler’s research so publicly relevant. Rather than questioning the economics of general equilibrium, ‘nudging’ is a proposal in calculated engineering: we can build policies that create outcomes similar to those of theory by gently walking slightly irrational, bounded economic agents through the correct ‘architectures of choice’. I am not saying that this is not positive: I am sure that creating psychological incentives so that people increase their investments in retirement will eventually help them; but so would a stronger social security net and a stronger, better funded state welfare apparatus. At the end of the day, the metrics of success in behavioral economics are uncritical of how the economy is built and remit to the ‘less human’, more market-centered, and ‘more surreal’ varieties of economic analysis that behavioral economists like Thaler so bemoan at a first degree of approximation.

Thirdly, the economics prize showcases and arguably reproduces the lack of diversity and intellectual variety in the discipline. Historically, the economics prize is overwhelmingly white and male. Only one woman received the prize to date—Elinor Ostrom, “for her analysis of economic governance”; the same is true for non-white economists—represented by Amartya Sen for his “research on the fundamental problems of welfare economics”. So while economics might expand its reach in colleges, universities, and government offices throughout the world, the Nobel committee reminds us year after year that there is pretty much one type of economics that is better than the rest. It has a race; it has a gender. This is quite regrettable, particularly in a year when discussions about gender in economics were so prominent in the news. There is no dearth of women or minorities in economics—example: Maureen O’Hara’s work in market microstructure theory is perhaps more relevant and intellectually important than Eugene Fama’s somewhat passé discussions of asset prices and market efficiency from the 1970s that were recognized with the Nobel Prize in 2013. (Harvard’s Carmen Reinhart also jumps to mind).

So this was the best of prizes (for Thaler—kitchen remodel) and the worst of prizes (for the rest—economics won’t change much), a missed opportunity to nudge the discipline in a slightly different direction. Perhaps this is asking too much from a committee that represents all too well the gendered dynamics of economics in Sweden (I could not find a female committee member, but I might be wrong): in 2005, Statistics Sweden only identified one full professor of economics in the entire country. How’s that for an architecture of choice?

Juan Pablo Pardo-Guerra is an assistant professor of sociology at UCSD. His research explores the connections between markets, cultures and technologies.