A push in the right direction – but how?

Een duwtje in de juiste richting – maar hoe?

Sometimes, a gentle push is needed to help people make a good decision about their future income and health. Individuals are taking increasing responsibility for this, but in order to implement ‘nudging’ successfully, a number of important questions must first be answered, such as how this type of push should be given. Behavioral economics answers this type of question. Professor Kirsten Rohde said this in the oration she will make on Friday, 9 May 2014 marking her acceptance of the Chair in Behavioral Economics, with a focus on intertemporal choice, from the Erasmus Trust Fund. 

The ageing population and the recent financial crisis have put our social security system under pressure. The responsibility for future income and health is being placed increasingly with the individual. However, research in psychology and behavioral economics show that people have difficulty in bearing that responsibility. For example, we make plans to invest in our future, but continually delay their implementation and in the end do it inadequately. This gap between planning and doing cannot be solved simply by providing better information about the future consequences of certain choices.

Mechanisms

Behavioral economists know which psychological mechanisms stand in the way of making good investment choices. This knowledge can be used to create ‘decision environments’ that help people bear the responsibility for their own future.

The current libertarian paternalism uses ‘nudging’ as an instrument with which to create those environments. A ‘nudge’ is a subtle push in a certain direction that nevertheless allows people the freedom to branch away from that direction. In order to implement ‘nudging’, however, it is important to know who to ‘nudge’, in which direction, and how.

About Kirsten Rohde

Kirsten Rohde (1980) is an Endowed Professor of Behavioral Economics with a focus on Intertemporal Choice within the Department of Applied Economics at Erasmus School of Economics. She completed her PhD in 2006 at Maastricht University. She has worked at Erasmus School of Economics since 2006. She has been a fellow of Tinbergen Institute since 2007 and an associate member of the ERIM research school since 2008. She has been awarded the Erasmus School of Economics Top Talent Researcher Award several times and received a VENI scholarship from the NWO (Netherlands Organisation for Scientific Research) in 2008. Moreover, in 2012 she received the Top Lecturer Award from Erasmus School of Economics.

Rohde’s research focuses primarily on intertemporal choice, an area of behavioral economics that examines the trade-offs people make between the present and the future. She is working on a common behavioral irrationality: procrastination. She is interested in developing ‘nudges’ to help people prevent this type of irrational behavior. She does both theoretical and experimental work. Other areas of Rohde’s research include equality and social preferences, and decisions under risk.

More information

For further information: Ronald de Groot, Communications Officer Erasmus School of Economics +31 6 53 641 846 or rdegroot@ese.eur.nl