Have you checked your behavioral externalities?

In The Case for Adding Darwin to Behavioral Economics posted on the Ethical Systems web site,  Robert H. Frank  of Cornell University’s Johnson Graduate School of Management writes:

I use the term “behavioral externalities” to describe choices that affect social environments… Because social environments influence us so profoundly, both for good and ill, we have a powerful and legitimate interest in them. We would prefer to live in ones that bring out the best in us and to avoid those that harm our interests. Yet behavioral externalities have received virtually no serious attention from policy analysts, and it’s here that lie many of the most exciting opportunities for young researchers. Once you’ve been alerted to their existence, it quickly becomes apparent that behavioral externalities are ubiquitous. Careful empirical studies have documented the importance of behavioral contagion in such diverse domains as, among many others, excessive drinking, sexual predation, cheating, bullying, obesity, greenhouse-gas emissions, and compliance with public-health directives. Research has tended to focus on negative peer influences, but there is also compelling evidence of positive influences. The adoption of rooftop solar panels, hybrid cars, and plant-based diets, for example, have all been shown to be highly contagious…. As Darwin understood clearly, our fate depends not only on our own decisions and capabilities but also on those of rivals and partners. And that, in a nutshell, is the case for a broader and more inclusive behavioral economics, one that incorporates the rich insights of behavioral biology.

Several points about this.

First, in addition to policy analysts and young researchers, the notion of behavioral externalities should be of interest to compliance and ethics professionals seeking to understand and address cultural risks facing their respective organizations. (Among other things behavioral externalities are relevant to risk assessment.)

Second, I like the idea of adding to behavioral economics  information from other fields of knowledge. My personal favorite in this regard is moral hazard, which – like  Frank’s example – also involves choices that entail  a “rational man” making decisions that work for her/him but which are bad for the relevant larger group.

Finally, for those of you who haven’t read it I strongly recommend Frank’s Passions Within Reason: The Strategic Role of the Emotions. It is one of the most important works in our field.

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