“Behavioral Economics,” a new seminar for Swarthmore’s Economics department, fuses psychology and economics to develop a better understanding of what influences the decisions which people make that in turn affect the economy. The course is being run by Professor David Huffman.
Huffman has been teaching at Swarthmore since January. He has enjoyed his experience thus far on Swarthmore’s campus — “Just being on an arboretum is really nice” — though he ruefully observes a lack of cafes and bookstore options. This semester, Huffman brings “Behavioral Economics” to the Swarthmore community.
“One way to describe [behavioral economics] is as a combination of psychology and economics,” Huffman explains. The field is growing in popularity, having spread from research universities to liberal arts colleges. Like “Neuroeconomics,” which applies discoveries in neuroscience to economics, behavioral economics attempts to explain human decisions in a way useful for understanding changes in the economic market.
“Economists make assumptions about what motivates people.” Some of the traditional assumptions that Huffman outlines include the idea that people are “selfish, extremely smart, forward-looking, [and] patient.” However, these assumptions are insufficient to explain some of the market’s behavior.
This, Huffman explains, is what has made economists turn to psychology for new behavioral assumptions.
There are several important distinctions, however, between the approach of psychologists and economists. The disciplines have “different goals, different questions,” notes Huffman. “An economist wouldn’t take in all aspects of human psychology,” nor would the economist be necessarily concerned with how “real” an assumption is, so long as the assumption about behavior generates strong predictions.
“Economists at some level… only care about explaining market behavior. Even if the assumption [being made] is weird.” Huffman illustrates this with an example: if a model which suggested that a certain outcome in the Superbowl would result in an improved economy was tested and accurately predicted economic change, it would be considered useful.
Another important difference between the approach of economists and psychologists to behavior lies in their experimental methods. “Economists are obsessed with paying!” declares Huffman, observing that money is commonly used in experiments to reveal how a subject responds to real incentives. “Psychology is more optimistic. They don’t have to pay for the truth. But they also include deception… Economists can never do that.” Huffman notes that both methods have their limitations.
Next semester, Huffman hopes to teach an intermediate course in “Experimental Economics,” focusing on research techniques and making less use of mathematics than the Behavioral seminar. He has also enjoyed teaching Econ 1, particularly “the creative off-the-wall questions” of his students.