An Intern’s Deep Dive into Behavioral Economics
Stephanie Cook is a rising high school senior at Fort Worth Country Day in Fort Worth, Texas, U.S. We first met Stephanie last summer when she won Round 3 of the Wharton Global Youth Comment & Win contest for her personal story about Taekwondo on the article Advice from New York Stock Exchange President Stacey Cunningham.
More recently, Stephanie reached out to us to pitch a personal essay about her growing fascination with behavioral economics. This type of economic analysis applies psychology to human behavior as a way of explaining economic decision-making.
In another Wharton Global Youth student essay that is yet unpublished, Rachit Surana, a high school senior at La Martiniere for Boys in Kolkata, India, explains behavioral economics like this: “I’ve made an interesting observation when I go shopping with my grandmother. The available products are always changing. But I realize that we stop more often in the shops that offer wider selections of things to buy. That is expected, right? But here’s where it gets curious. We actually buy more often from the shops that provide fewer choices. This theory is called decision paralysis. Whenever our brain is faced with a complex decision, it either tries to take a shortcut or to avoid the decision entirely — so, when shopping we might buy less. In contrast, the shop with fewer options presents a simpler decision and thus better conversion.”
Stephanie has taken her economic interests a step further by immersing herself in field research through a remote internship at the University of Southern California’s Los Angeles Behavioral Economics Lab. She writes about her experiences in this personal essay.
On a daily basis, we are all confronted with one basic behavior – decision making. Have you ever thought about why you make certain decisions and if they are rational? I had never given much thought to the impact of my decision making until I started my remote internship in behavioral economics with Professor Brocas from the University of Southern California.
Let me back up a minute and explain how I even got interested in behavioral economics, which merges economics and psychology. Simply put, it studies and tries to understand decision making, in an attempt to make economic models more accurate.
We Are ‘Predictably Irrational’
Last summer, I attended a program called “Economics for Leaders,” run by the Foundation for Teaching Economics. I fell in love with economics and using economic analysis to tackle public policy issues.
Soon after, I began my college tours. During my first visit to Duke University in North Carolina, I learned that Professor Dan Ariely was a highly regarded behavioral economist. Through my research, I bought and read his book, Predictably Irrational. It highlighted how humans make decisions without rationalizing their outcomes. A simple example is how we react to the promise of free products or services. We may jump at the chance to take advantage of a free day at the museum, but we don’t think about the long lines and hour-long wait to see one exhibit.
My research then led me to discover that a Nobel Prize in Economics was presented to Professor Thaler of Chicago University for developing “nudge theory”. This behavioral economic theory suggests that positive reinforcement and indirect suggestion can influence decisions and actions without people realizing what is happening to them. A practical example is of a grocery store placing arrows on the ground leading to the produce department. Research showed that this simple nudge resulted in nine out of 10 people following the arrows, and produce sales increasing significantly.
The more I learned about behavioral economics last summer, the more determined I became to finding an internship in the field. I explored whether or not any universities would take on a rising high school junior, rather than just graduate students who already had a college degree. I then stumbled across University of Southern California’s website for their Los Angeles Behavioral Economics Lab (LABEL). As I dug deeper into the website, I found that the school accepted visitors and on occasion, remote interns. So, I reached out to the director, Professor Isabelle Brocas, sent a résumé, and wrote an essay about my interest in this field and why I wanted to be involved.
It worked! For the past year, I have been working remotely from my home in Texas as an intern for LABEL. As a behavioral economics intern, my role is to summarize scientific literature reviews for Professor Brocas. A scientific literature review provides an overview and analysis of what has been published on a certain topic by accredited researchers. I usually prepare two-to-four literature reviews a month. I have spent my junior year researching how bilingualism affects decision making. My reviews help Professor Brocas conduct experiments, develop new experiment paradigms, plus support her findings.
“Condensing a scientific article from 20 pages to one page involves understanding how completeness, accuracy and editing work together. It takes time and practice!” — Stephanie Cook
The research I have read and summarized has allowed me to learn how monolinguals (people who speak one language) and bilinguals (people who speak two languages) differ in their decision-making process. The various methods of scientific testing have been incredibly enlightening in understanding how children, teens and adults inhibit, switch and suppress information.
Many experiments have shown that since bilinguals monitor and practice two languages, they are more successful in inhibitory control and switching control. These are scientific terms that refer to the thought processes that permit someone to regulate their impulses. Effectively, being bilingual enhances decision-making. Studies consistently reveal that if you speak two languages, you have better problem-solving abilities and it challenges certain parts of your brain that focus on memory and reasoning. Speaking in another language shapes the way individuals think.
Embracing Statistics
How does this fit into economics? The big picture of studying the impact of bilingualism is to develop programs that increase cognitive skills in schools, so public finance and government spending are more effective. Studies in Canada have shown a positive impact between bilingualism and Gross Domestic Product, a key indicator used to gauge the health of a country’s economy.
Here are a few other valuable takeaways from my internship:
- Writing clearly and simply is critical to delivering a research article summary that a professor can rely on. Condensing a scientific article from 20 pages to one page involves understanding how completeness, accuracy and editing work together. It takes time and practice!
- Nearly every research paper I worked on displayed results tables with such mathematical concepts as mean scores, standard deviations and regression analysis. People assume that Statistics is the “easy math” in high school compared to Calculus. Professor Brocas has encouraged me to add Statistics to my senior schedule, and I now see the value of its application.
My research over the past year has opened my eyes to the area of decision-making. I am so intrigued by the “why” of decision-making and now want to understand the “what”. This summer I’m going to explore data science to understand what numbers tell us about the decisions we make.
I am excited to pursue economics in college, and I also want an interdisciplinary nature of study where economics can be studied with mathematics and then applied to business. My internship at USC’s Los Angeles Behavioral Economics Lab has helped me to make better decisions about my own interests and my future.
Related Links
- Foundation for Teaching Economics
- Los Angeles Behavioral Economics Laboratory
- Dan Ariely
- Prof. Richard Thaler Wins Nobel Prize in Economics
Conversation Starters
What is behavioral economics?
How did Stephanie Cook build on the summer program she attended? How is she truly acting on her interests and not just checking a box?
I think Behavioral Economics as a school of thought has much more to offer than the general economic theories which assume consumers to be rational, since it’s no doubt that the smartest creatures on earth are not so smart while making decisions, being influenced by forces like brand value, social acceptance, etc. than the actual utility.
But then again, if people were rational, then ‘Advertising’ as a discipline would not even exist as no influence would be able to change their decisions based on achievement of utility.
Already being in the process of opening a start up, I can easily say that it would have been impossible to create a strong marketing front without knowing anything about consumers and their reactions.
And it’s not only business, the economics of behaviour has endless possibilities.
Say, being a part of the KWHS Investment Competition, creating and developing a good strategy was one thing, but I personally believe that a bit of study and knowledge about how to present the real deal and what all could convince the judges and the audience of the essence of the strategy is what actually helped me and my team ‘ Filter Coffee Investments’ to bag the global round one in the 2019 edition of the same competition.
All I mean is that behaviour economics is the key to humans. It can tell you everything about a person, his decisions and reactions. And that one strong key that one needs to crack the lock of successful marketing.
I agree with Dipit G. that Behavioral Economics is special because we need to consider consumers’ thoughts in a way that directly involves the influence of emotions and feelings. I also agree that we, as human beings, are the smartest creatures. Moreover, based on Stephanie’s experience, Dipit G. thinks of his own experience of taking part in KWHS, which is really encouraging.
But what I disagree with his comment is that we are not always smart enough to make rational decisions because we are constantly influenced by factors such as brand value, social acceptance, etc. than actual utilities. I do not think there is anything shameful about being influenced though. First, influence is not always a bad thing. Also, emotions and ethics from ethic and preference do not mean that the decision is irrational. For instance, according to data released by IDC, Chinese people prefer to buy HUAWEI phones instead of iPhone these days because of their preference for the Android System, rising patriotism, and price considerations. Is that irrational? Is iPhone better than HUAWEI? This kind of questions are hard to answer. Also, why we will pay more for “brand value”? Because in a long history of the brand, it always had high quality and confirmed by customers, so brand value is the proof of good quality. Moreover, these things can always improve the actual utility. For instance, clothes are always similar and the uses of them are covering, keeping warm and decorating. However, the price of T-shirts ranges from 15 dollars to 500 dollars, because of brands or design. Design and brand value do not offer actual utility. Yet, sometimes people are benefited from them. With our experience, we know that formal and fancy suit can improve the chance to trade successfully because it is fit to your social class and wealth level. Another thing that I need to mention is the use of advertising. It is so narrow to declare that “if people were rational, then ‘Advertising’ as a discipline would not even exist as no influence would be able to change their decisions based on achievement of utility”. We need to understand the use of advertising: help people to know better about products. It is not always irrational to believe advertisement. In the end, I disagree this sentence“It can tell you everything about a person, his decisions and reactions”, because it is too absolute.
Hereinbefore, these are my ideas about the comment of “Dipit G”. Furthermore, I have my own thoughts about this article.
Stephanie Cook’s experience to learn and pursue the knowledge she wanted is really impressive and inspiring. At the same time, the explanation of Rachit Surana with the example of shopping is easy to understand. Through the article, I knew the existence of LABEL. Also, I knew the work of Stephanie and have a glance at “nudge theory” with a vivid example. Moreover, I can feel the strong and firm determination of her to study this area and how hard she worked. In the end, I understand the importance of math and statistics of economics and how data worked to help analyze.
In short, I learned a lot from the article. If a person really wants to study something, no matter how difficult, he will always hold on to it. The experience is super inspiring and I knew some new way to study economics and get the chance to pursue knowledge. I am from Xinjiang, which is the northwest corner of China. Sometimes, it is difficult for me to get this kind of chance to study economics and finance in high school. Fortunately, I have kept pursuing my dream for many years and have never given up. Finally, with the help of internet, I can get the chance to study this knowledge and know about KWHS. Behavioral Economics is a big but meticulous area in our daily life. From “nudge theory” to make decisions, they are all about Behavioral Economics. I do not agree that the final purpose of Behavioral Economics or other economics areas is only to maximize benefits. Instead, I believe the final goal is to help people, no matter sellers or buyers, find the balance in economics life. I do not want people to ignore emotions and feelings when they considered economics because money and feelings are all valuable. Behavioral Economics can help sellers make more suitable tactics to fit the market and help buyers do the decision that they won’t regret. All in all, after I opened the door of economics and finance world, I am pretty sure this is my future major and career choice. I will hold on my dream and endeavor to pursue it like what Stephanie do.
You raise several intriguing points, Xiangxin! I’ve also noticed that “brand value” chiefly affects a consumer’s perceived value of the product. I remember reading a Time article, which mentioned the heaps of zany, pricey fashions that high-end designers are able to sell. From an emblazoned dry cleaning bag to a $290 paper bag, it’s clear that neither the designer’s nor the consumer’s choices are completely transparent. I also reckon that Cook demonstrated a stellar initiative to pursue her passion, and to seek such a fascinating opportunity. This article has also raised my interest in the field of Behavioral Economics, and I think that your own enthusiasm is quite admirable!
Stephanie, this was a great article to read! Seeing how your interest in behavioral economics has led you to pursue amazing opportunities is absolutely inspiring.
What I loved most about your article was learning about behavioral economics. I’ve never heard of the subject before, but was thrilled to realize that I am familiar with its concept. While reading, I was reminded of an interview I read about in the PennToday newsletter featuring Patti Williams, Wharton Professor of Marketing, and felt like it offers an interesting perspective on behavioral economics. It’s titled, “How shopping became a version of social impact” and discusses how shoppers increasingly want meaning from their purchases. Factors such as brand sustainability have increasingly begun to affect purchasing decisions made by millennials, demonstrating how young consumers purchase things that are consistent with and help expand upon their own values and beliefs, rather than solely for the physical attributes of products and services. Though this phenomenon is more intentional than nudge theory and your research in monolingual vs. bilingual decision-making in the sense that consumers are making a more proactive decision to shop from sustainable brands, I believe it is a valuable example of behavioral economics in a different lens. It is valuable because it outlines two human behaviors which I think play a key role in the study of behavioral economics.
The first behavior is self-actualization from Maslow’s hierarchy of needs. As Dr. Williams states, “This notion of self-actualization… means to find my place in the world in even very mundane, everyday activities. And I think it’s part of economic development, part of a changing cultural ethos about what matters to us.” To an extent I agree with Dr. Williams’ perspective, because I indeed feel as though consumers have increasingly become concerned with sustainability, especially with the media projecting immense concerns about climate change and environmental degradation. However, the second behavior I would like to point out is the self brand connection (SBC) construct, in which brand associations are used to construct one’s self or to communicate one’s self to others; I believe it is essential to acknowledge the SBC construct in response to Dr. William’s point, because it highlights a deeper desire to enhance one’s identity, rather than one of pure altruism. Sustainability has become a trend, especially due to stigmas surrounding fast-fashion and its pollution-prone business model, causing consumers to feel the need to shop at sustainable brands in order to construct a with-the-times identity. Arguably, this is not true of all consumers, however, it is an important aspect of today’s fashion industry and provides a different perspective to behavioral economics.
I am incredibly interested in other perspectives, so what is your take on behavioral economics? What examples have you seen in your day-to-day lives?
Wow! What fantastic comments you have all made to my article. I thank you for taking the time to read my essay and adding your views and thoughts.
Let me comment on what seems to be a common thread – behavioral economics and consumer spending/investing. Dipit G discussed his investing strategy while John M kindly provided a link to behavioral finance. Xiangxin and Serene further elaborated on brand value, and Rachel highlighted shopping and social impact.
I recently read an article in Behavioral Public Policy and McKinsey Quarterly about how our personal biases along with factors such as music, temperature and physical markers impact how consumers make decisions. From sustainable consumption to investment decisions to food choice, understanding consumer behavior helps businesses nudge people to make smarter, better and sustainable choices. I agree with Dipit in that understanding human behavior guides successful marketing. However, it is important to understand that consumer behavior is shaped by irrational decision making.
Let us look at the example of behavioral investing. One behavior that is irrational and causes many investors to get into trouble is known as “herding”. If there is buzz about a particular stock and everyone is focusing on the price rising, your decision is more about following the crowd rather than logically looking at your financial goals and risk tolerance. Think about market “bubbles” – there is nothing rational about them. Conversely when everyone is selling, you may choose to do the same for fear of losses. Are you thinking long term or short term? Positive and negative feelings plus emotional attachment to stocks can trigger irrational decision making in the stock market. What strategies can a financial advisor or investment firm put in place to mitigate an investors irrationality? John’s link to Charles Schwab client advising strategy using biagnostics is fascinating because the organization takes into account emotional bias.
Rachel discusses sustainability and the millennials wanting to purchase such products that represent their values. How does a corporation or business nudge millennials or Generation Z to purchase their product, given millennials value their time and collaboration? There is a term called “nano marketing” which is a subtle nudge by using influencers to talk about credible brands. Think about Instagram and what products appeal to your emotions plus what social proof you value.
Remember, economic choices are shaped by emotions. I wonder what will appeal to you and me who are Generation Z!
Hi Stephanie, thank you for the continued insight! I find it very interesting that you mention the impact of influencers, because I just read an article from Harvard Business Review that states, “In 2018, 19% of all U.S. consumers — including 36% of those aged under 25 — purchased a product or service because a social media influencer recommended it.” In this day and age, this form of “nano marketing” definitely seems to be working. Thinking about how exactly influencers succeed in driving brand sales, I would agree that the economic choices that we make are shaped by emotions. The influencer value proposition is based on the premise of promoting a lifestyle, seamlessly wearing or using a product as if it has always been a staple element in their life, rather than simply selling it. I see this most with Curology, the personalized skincare provider, who has been one of the first skincare brands to disrupt the digital market using influencers such as YouTuber Emma Chamberlain. By having these influencers attest to both the physical and emotional impact Curology’s skincare product has made on their lives, they create a connection with their viewers and followers. Being able to relate to their problems with acne, for example, and the emotional baggage that comes with it, even I have felt incredibly moved, causing me to purchase my own Curology shipment. The brand’s mission in and of itself -providing affordable personalized skincare products- is a testament to the power of emotion in economics, because personalized products hit closer to the heart than generic ones. If a brand can make you feel something, whether that be through an influencer or simply through the product that they offer, they are a step ahead than those that don’t, demonstrating the driving force of emotions in decision-making.
I’d love it if this discussion would continue, because I find this subject to be incredibly interesting; so here are some questions: what are some of the negative emotions that play into the way we shop? When an Instagram post is deemed as an #ad, do you feel positively or negatively about the brand or influencer?
Hi Stephanie! After reading the article and your active comment section, I have really come to admire your research efforts and your passion in economics, which you have obviously incorporated into your everyday life. Thanks to you guys, I have learned a lot of valuable information and want to contribute to the discussion by providing my own experience and perspective of behavioral economics.
Believe it or not, I also participated in the summer program Economics For Leaders. The different activities we took part in really made me look at economics differently. I realized that not all theories I learned from AP Econ the previous year were applicable to solving real business and financial dilemmas. However, by observing and experimenting with other students, I began to see decision making as a play on the human mind. The influence from others, the values we believe in, our cultural, socioeconomic, and family background… There are millions of factors that influence our choices and behavioral economics helps us understand how these choices play a role in altering conventional economic theories and models.
Interested and excited about my new interest in behavioral economics, I tried to incorporate this subject area outside the summer program. Last summer, I had the honor to assist Professor Jin Xin from the University of South Florida with a unique and intriguing research – Terrorist Attacks and the Labor Market Outcomes of Immigrants. My work involved collecting statistical data on terrorist attacks for analysis of the labor market outcomes of immigrants. Noting a general trend of growing unemployment for non-white immigrants three months following any such attack, I stared at the numbers and pondered the psychology behind them. Based on the rational thinking model favored by economics theorists, low-paid immigrant employees should be in higher demand in the labor market. So how then should we take into account human behaviors and irrational decision-making when assessing economic conditions? It can be assumed that, to many employers, rising threats of terrorism and their safety have offset the benefits of lower costs for their businesses.
Instead of basing every theory on the assumption of rational customers and controlled environments, behavioral economics takes a closer look at actual human behaviors. It is a more complex and advanced method of examining our society for it takes into account both empirical analysis of psychological behaviors and its impacts on economic models. Behavioral economics is an ever-changing subject as it always sparks new observations and theories as the world progresses. Therefore I believe that although it is a relatively new area of study, it has great potential for development.
Splendid work, I couldn’t say much, because of enough viewpoint on your post.
Your work on behaviour economy helps me a ample to understand Behaviour economy in another method.
Hi Stephanie! I actually relate to you a lot while reading this essay, from taking action on your interests to your excitement about behavioural economics.
As one of the first students to learn the new IB Economics syllabus, behavioural economics was my favourite section out of all the latest knowledge added. I totally agree with your concept about “we are ‘predictably irrational'”, and it’s exactly how I often fell for pushy salespeople in cosmetic stores.
For example, adding up to your point, the bounded self-control I have, which is one of the characteristics of irrational consumers. Rationally, we know how much and what to buy. However, with the pricing strategies and the salesperson keep telling you that “after you buy one more product, then you can have another discount off”, or “this product really suits you”, I just can’t control myself to buy one more product. This discount reward just goes on forever, making you buy more than you need, acting predictably irrational, as Stephanie mentioned.
After learning Behavioural Economics, I suddenly realized how the nudge theories and analyzing consumer behaviours are essential for business. But this also leads us to our branches in interest. Rather than being triggered on “why” and “what” of decision making, I focus on the “what’s next” and “how to apply” part of decision making, which is the marketing and strategic part of the business.
Following about marketing, this brings us to our second similarity: striving for opportunities to take action on our interest.
“I explored whether or not any universities would take on a rising high school junior, rather than just graduate students who already had a college degree.”
This just strikes me as it reminds me of my experience recently. Getting marketing internships has been on my bucket list since I’ve discovered my target to work in this industry. Still, I’ve pushed this target to my uni life list. I’ve realized how firms only hire undergraduate students for summer internships due to legal protection and knowledge level issues. But, an opportunity suddenly showed up.
During the school’s career festival, a CEO from a digital marketing company was invited to give a share. During the Q&A section, I actually raised my hand and asked if they would accept a high school student for internships. Then, guess what? After several rounds of communication, the CEO asked for my resume regardless of all the issues and challenges about hiring a high school intern.
Reading about your internship experience excites me more for mine happening in the coming summer, and I totally support your interest in pursuing your interest. Also, it’s so motivating after knowing that you will be studying related subjects in college. Hopefully, I can also study marketing with the consumer psychology minor in my dream school (whispering, Wharton). Anyways, this is not the main point of the comment, but your comment is just driving me to pursue what I want to be with the experiences you are sharing.
Your fascination with behavioural economics and your steps of digging into your passion shows that you are definitely someone I wanted to know. So, after two years of your essay, I’m curious about how you are doing recently and where you are reaching your goal of doing the interdisciplinary study?
Hi Tiffy,
Thank you for your commentary. I am so excited to hear about your marketing internship. The greatest saying in my house (the Cook mantra) is “if you don’t ask, you don’t get”. I’m glad you raised your hand and didn’t just accept the status quo about internships. The summer before my senior year I completed another internship with a financial advisor and came to nearly winning a nine month investment competition. It changed my trajectory of study and made me reassess my interdisciplinary thinking.
As I began the college search process, I decided that I wanted to do an undergraduate business degree rather than an economics degree. Business to me was more broader and suited my mathematical strengths and problem solving skills. While behavioral science was fascinating, I was beginning to take more interest in the complexity of how markets operate, the role of data, and even supply chain management.
Since writing the article, I achieved my goal of being accepted into USC and many other prestigious business schools. I am now a rising sophomore in the business honors program at McCombs Business School at UT Austin – which I love!! I have learned that there is so much to explore at college and you can start with one idea/passion (interdisciplinary studies) and find yourself enjoying something else completely (finance).
My advice to you is take your time to explore the many facets of business and if you are interested in marketing think about complimentary majors such as strategic communication as well as psychology. A great resource I recommend is the website ama.org (American Marketing Association).
I wish you all the best in your internship and future studies!