Although the United States cannot unilaterally lower the price of oil, it can reduce its consumption by using oil more efficiently and by developing alternative sources of fuel.
The supply price and the demand price should be roughly the same. You're not supposed to have two different prices. According to economists.
Many problems are so complex that even if we had the money to fix them, we wouldn't know how to do it. Fixing inner-city schools, reducing obesity, creating peace in the Middle East are just a few examples.
In some ways, the finding that financial education doesn't provide long-term payoffs is hardly surprising. After all, how much do you remember from your high school chemistry class? Unless you use chemistry at work, you probably don't recall much about ionic bonding.
My thesis topic was 'The value of a human life.' I asked people a question: 'Suppose you had some risk, a one in a thousand risk of dying - how much would you pay to eliminate it?'
In the world of traditional economics, it shouldn't matter whether you use an opt-in or opt-out system. So long as the costs of registering as a donor or a nondonor are low, the results should be similar. But many findings of behavioral economics show that tiny disparities in such rules can make a big difference.
I am all for trying to teach household finance in schools, starting as early as possible. And when it comes to high school, I think learning about compound interest is at least as important as trigonometry or memorizing the names of all 50 state capitals.
It's not that we can predict bubbles - if we could, we would be rich. But we can certainly have a bubble warning system.
The lesson for businesses is you are dealing with real people. Those are your customers, those are your employees, those are your bosses, and the better you understand how real people tick, the more successfully you will be able to accomplish your goals.
The government employs scientists of many varieties in technical capacities, from estimating the environmental toxicity of a chemical to the structural soundness of a bridge. But when it comes to forming policies, these scientists and, especially, behavioral scientists are rarely at the table with the lawyers and the economists.
Tax cuts are one of many ways to stimulate the economy. Building infrastructure, for example, is another.
Whenever I'm asked to autograph a copy of 'Nudge,' the book I wrote with Cass Sunstein, the Harvard law professor, I sign it, 'Nudge for good.' Unfortunately, that is meant as a plea, not an expectation.
In the 1940s, economics started getting highly mathematical. It was basically because economists weren't smart enough to write down models of real behavior that they started writing down models of highly rational behavior - and they kind of forgot about humans.
Lotteries are just one way to provide positive reinforcement. Their power comes from the fact that the chance of winning the prize is overvalued.
We behavioralists differ from our more traditional brethren in the way we characterize agents in the economy.
It's essential that we understand things like the free-rider problem, but we also need to understand that, fortunately, humans are a little nicer than economists give them credit for. Some people actually leave money at roadside fruit stands; some people give money to NPR so we can listen to it.
Shopping for an annuity with hundreds of thousands of dollars at stake can be daunting, even for an economist.