Todd Henderson on Project Behavior: What the Battle is Really About

Josh Wright —  7 December 2010

Todd Henderson is a Professor of Law at the University of Chicago Law School.

Lying in bed for the past day with a stomach bug, I’ve enjoyed reading the contributions of my friends and colleagues. Perhaps the wisest course would be to, like Leonardo DiCaprio’s character pretending to be a doctor in “Catch Me If You Can,” say “I concur” and slip back under the covers. My general views on the subject of Project Behavior (you can choose your reference: either “Project Runway” or Project Mayhem from “Fight Club”), align with the likes of Manne the Elder, Manne the Younger, Epstein, Lambert, and so on. No surprise there. But that is what I want to write about – why? More specifically, why do views about the value of Project Behavior cleave along political or ideological lines?

Consider economics. There is near universal agreement on the value of thinking of the world through the lens of supply and demand curves, marginal incentives, utility functions, and so on. There may be quibbles with the inputs or application of some economic principles to some cases, but no reasonable person can object to the idea of bringing economic concepts to bear on a particular decision. Other factors, like moral or ethical values, may enter the analysis – economics has never excluded them – and trump monetary ones, but that is expected. Economics is not synonymous with money or capitalism or materialism.

So why should Project Behavior be any different? There are tools in behavioral economics or behavioral law and economics that we can use or not use depending on the situation, but to cast the entire Project into doubt because of some of the applications is like throwing out economics because the Depression-era Federal Reserve or K-Mart or your Uncle Bob practices it badly.

The contributions of Project Behavior, some big, some small, and some in the middle, have been set forth in other posts, so I won’t recatalog them here. I took Professor Sunstein’s Elements class with my friend and co-contributor Thom Lambert, and I remember being a part of some of the early classroom experiments in the field. I found the insights and possibilities deeply compelling, and they fundamentally altered the way I look at the world.

One specific memory stands out. We were playing the Ultimatum Game. We were divided into sets of two and one of the pair was given $10. That person was then asked to make an offer to the other person for some part of the $10. If the offer was accepted, the deal was done. If it was rejected, the $10 went back to the professor. After we struck the deals, Sunstein claimed that economic theory predicted an average accepted offer of somewhere near $0.01, while Project Behavior predicted something like $4. Our class average was consistent with Project Behavior’s prediction. Was this a sign that we were not “rational” in the classical sense – after all, both parties are better off when the split is $0.01 and $9.99 – or an artifact of the social setting? I can’t be sure, although the work of my colleague John List, among others, suggests that the setting may be doing a lot of work here. But so what? Showing that humans act certain ways in certain settings is interesting, and the fact that we all scoffed at the one person in the room who offered $0.01, was a fascinating insight into human behavior and decision making. (By the way, that guy went on to make lots of money.)

What should we do with the insights from this kind of work? I don’t know. I do know that I would be hesitant to enshrine it immediately into public policy for the reasons set out by my co-contributors. But that has more to do with my views about government than about Project Behavior. After all, who could object if a private enterprise deployed the insights of behavioral economics? According to one of my law school colleagues, firms across America, including his, are doing this already. Apparently, his firm uses a variety of quirks of human economic decision making uncovered by behavioral economics to improve worker productivity and happiness. I can think of no reason whatsoever to object to this. Let the insights or lack thereof be deployed in the market; where they work, they will flourish, and where they don’t, they will fade away. The problem I have, and I think most everyone else here has, is a skepticism about the use of these tools by government, which does not face the same intensity of competition as private businesses in testing new ideas and techniques.

I used the term Project Behavior because it has always seemed to me that the behavioralist camp was originally about a challenge to the use of classical economics in the public policy sphere. Law and economics had a right-leaning bent when it was applied to matters of policy for some reason, and what the left-leaning policy wonks needed was a tool to win back some policy ground. This is the fight we are having, and I think it would help if we reduced it to that. The battle is about the scope of government; the battle is a belief in freedom versus a belief in progressivism. It is, as Thomas Sowell argues in his book “A Conflict of Visions,” a battle between worldviews, not a technical debate about the merits of particular technologies. If it were, then we wouldn’t see right-wingers using the technologies in their own private endeavors.

In sum, I’m skeptical about the ability of Professor Sunstein or Professor Warren or any of their ilk to make the world a much better place deploying the insights of Project Behavior, but for reasons that have little to do with anything about Project Behavior.

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