Behavioral Economics: Principles, Procedures, and Utility for Applied Behavior Analysis

Abstract

Behavioral economics, as the name implies, is a hybrid area of research. One form of this hybridization is the use of principles, procedures, and measures associated with behavior-analytic research (e.g., direct observations of steady-state operant behavior). However, Googling "behavioral economics" reveals a second hybrid that will be less familiar to readers of this journal, but more familiar to economists. This second form of behavioral economic research represents an infusion of decision-making research findings into mainstream economics. Most of these findings have been contributed by cognitive psychologists such as Kahneman and Tversky (1979), working in the area of prospect theory. Discoveries made by these researchers have had a profound influence on economists because they demonstrate reliable deviations from expected utility (maximization) theory--an assumption upon which much economic theorizing was based. This influence was recognized by the awarding of the 2002 Nobel Prize in economics to Daniel Kahneman, the father of prospect theory. The methods of research used by prospect theorists rely primarily on asking participants to make a single choice between hypothetical prospective outcomes (e.g., to choose between a sure thing and a risky outcome). As in most psychological research, choices are averaged across individuals and subjected to statistical analyses. No doubt, some readers of this journal will be critical of some components of these research methods (e.g., the practice of measuring self-reports of what one might do instead of measuring choices between real outcomes). Such critiques are worth empirical investigation (e.g., Johnson & Bickel, 2002), but it should be recognized that some very important choices made by humans are prospect choices; that is, one-time choices where the individual weighs prospective outcomes before they are experienced. For example, when deciding to accept or reject the offer of a promotion at work, the individual will make a single choice (rather than a sequence of choices continuing until choice stabilizes). Although it would be interesting to determine if prospect choices represent steady-state choices made after behavior has reached an equilibrium with the prevailing contingencies, studying choice in this way will take it out of the context of choosing between prospective outcomes, and may tell us little about some very important decisions that humans are called upon to make. Consider, for example, the prospect choice that members of the U.S. congress were being asked to make at the time this paper was written--whether or not to accept the Treasury Secretary's advice to back failing Wall Street financial institutions with $700 billion of taxpayer money. Unprecedented choices are choices between prospective outcomes, and these choices are worthy of a thorough behavioral analysis. An obvious place to begin such an analysis would be to study how prior experiences (i.e., history) affect prospect choices (e.g., experiences with outcomes similar to those that will be chosen between on a prospect basis). It goes without saying that the decisions made by members of the U.S. Congress will be affected by their prior experience with similar economic crises (e.g., the financial bailout and return to solvency of the Chrysler Corporation in the 1980s). Also obvious is that a rat's steady-state pattern of choice is a product of its history of experiencing the consequences of the choices it makes (pardon us for comparing rats to members of Congress). No one will be surprised to see the rat's first choices in a new condition of the experiment, analogous to the prospect choices made by humans, affected by prior reinforcement history (see Lattal & Neef, 1996, for a review). To the extent that the new choice context (e.g., an economic bailout of Wall Street) resembles the old one (e.g., the bailout of Chrysler), we would expect the rat (or the member of Congress) to behave as he or she did in the past if that pattern of choice had been selected by consequences. …