10 must read on Behavioral economics
I started writing this article quite a while ago when I heard once again about behavioral economics and its potential within design from my colleague Santiago De Francisco, a really keen professional on this topic. Today, I decided to finish it pushed by the achievement of one of the pioneers of this discipline, Mr Richard Thaler, just awarded with Nobel of Economics 2017.
What’s the connection between strategic design and behavioral economics?
Making a long story short:
Design try to understand people’s needs, desires and motivations to create new solutions that add value to the end user , in other words make it desirable for the customer. Moreover, the solutions need to be feasible technically, and economically viable.
On the other hand, Behavioral economics studies the psychology behind economic decision making of individuals. It explores why people sometimes make irrational decisions, and why and how their behavior does not follow the predictions of economic models.
Hence, if we look at it through economic lenses, (strategic) designers are responsible to find sustainable business models validated by the customers, and to do so, they need to understand in detail the decision making process of these potential customers. Here it is! If we combine both fields we can gain a holistic understanding on how likely a product/service would be bought by the customer.
“If I understand how users are making decisions, I can adapt my offer to increase the likelihood of being accepted”
If you find this combination of disciplines appealing, you may be interested to read Santiago’s and myself selection of behavioral economics books:
Misbehaving. Richard Thaler This book explains why traditional economic is so classically wrong. It provides an evidence-based discussion of the limitations of traditional economic theory in a way that is also accessible to non-economists. It is definitely a good book to start on behavioral economics!
Predictably irrational. Dan Ariely. Highly recommended for people selling products or services, this book gives a complete view of the duality rationality vs emotionality. The author illustrated each experiment with a scenario followed it with hard data, being able to explain complex concepts with understandable terms.
Nudge. Richard Thaler & Cass Sunstein. Excellent book if you don’t know a lot about behavioral economics. It talks about the subtle influences that really affect individual and collective choices in our daily lives. Easy to read with compelling and well researched content.
Blink. Malcolm Gladwell. Superb book about the power of intuitive decisions in our current world illustrated by a great compilation of real examples and experiments. Gladwell’s writing style and its sophisticated research makes this book entertaining and surprising at the same time. A perfect holiday book!
Freakonomics. Stephen J. Dubner & Steven Levitt. This book is an opportunity to look at economics from a different point of view. It touches theories about incentives, what motivates people to act, or not to act in certain ways and about the long-term consequences of short-term decisions. Perfect read about economics for non economists!
The power of habit. Charles Duhigg. Easy to read and practical book with interesting examples. It explores the potential of building new habits or changing bad ones to achieve our goals in life. The understanding of “cue-habit-reward” cycle which dictates most of our actions is my favourite take away from this book.
Hooked. Nir Eyal. A well structured guide full of examples to build habit forming products. It presents a simple and practical user engagement model based on four stages (trigger, action, variable reward and investment) which applies consumers’ psychology to design addictive products or services. Nice resource for designers, developers and entrepreneurs!
The Why axis. John A. List & Uri Gneezy. The book is a good combination of behavioral economics and business strategy, that focuses on analyzing how experimental economics can help us figure out what motivates people. Very readable and accessible, their field experiments are innovative and their results can be unexpected.
Happy Money. Elizabeth Dunn & Michael Norton. If you have been struggled by the question “Can money buy happiness?” this book might have the answer. It depicts five principles on how to spend your money to contribute to you subjective well being. The principles are supported with field research and experiments. I must read book if you are interested in behavioral sciences with a twist of economics.
How to worry less about money? John Armstrong. As part of the Toolkits for life of The School of life, Armstrong bring us different approach related to how we (should) use money. The book is focus on how people perceives money, levels of attachment and meaning. Using daily basis examples, it lets you explore money in a new way, discovering what really matters in the end.
We hope you will enjoy reading these books. Let’s spread the word of the high potential of applying behavioral economics within design.
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