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Behavioural economics to master human nature

Posted on Wednesday, May 15, 2019

Behavioural economics allows us to understand human nature better, and design the world to be more people-friendly, writes Dilip Soman

Organisations and businesses are fundamentally a collection of human beings. Our traditional models of business assume that people are clever, calculated, self-centered and forward-looking beings.

On the contrary, humans are emotional, impulsive, generous, lazy and social. Putting humans in a setting made for econs is a prescription for disaster. Indeed, many of modern society’s ills – poor individual financial wellbeing, environment and pollution challenges, and unhealthy lifestyles – can be attributed to human nature flexing its muscles. Products, processes, and programmes designed for humans should assume that the user will be impulsive, forgetful, and might be overwhelmed by too many choices or information. A key in helping humans is to help them make better choices, perhaps with a fundamental skill in management is to understand and master the science of behaviour change.
The Rotman School of Management offers a unique MBA programme where students can actively integrate behavioural economics into their management training, and to truly understand organisations and business as a collection of humans and not as efficiently running machines devoid of human nature.
The centerpiece of the School’s efforts in this area is a centre called BEAR – Behavioural Economics in Action at Rotman. BEAR is in the business of knowledge co-creation with many corporate, government and not-for-profit partners, and knowledge dissemination through MBA and Rotman Commerce courses, an online open course, executive training, and student internships. There are four ways in which both MBA and Rotman Commerce students at the Rotman School engage with BEAR.
The first is through courses. Rotman offers two electives in Behavioural Economics, the first one is a foundational course in which students are exposed to the principles and methods of Behavioural Economics, and the second - a lab course, in which student teams work with one of BEARs partners to help them understand, diagnose, analyse and solve a behaviour change challenge.
The second way in which students engage with BEAR is through internships. BEAR hires several students to work on various projects for specific periods of time. Students get the opportunity to put their learnings in a real hands-on setting under the supervision of behavioural science experts.
A third route to engagement is through participation in the many speaker events and conferences that BEAR hosts. Over the past few years, BEAR has hosted Nobel laureates Richard Thaler and Daniel Kahneman, as well as other leading experts including Angela Duckworth, Dan Ariely, Cass Sunstein, Chip Heath and Shlomo Benartzi. Recently, BEAR hosted Canada’s national research symposium on Financial Wellbeing in partnership with the Canadian government.
Finally, students can also participate in case competitions and hackathons. One of BEAR’s most popular events is the New Product Challenge in which student teams pitch product ideas that will allow consumers to exert self-control in domains that range from resisting tempting food, saving for retirement, sticking to goals and ensuring safe driving habits. BEAR actively collaborates with other centres at the Rotman School to give students the opportunity to adopt a behavioural lens on various management problems ranging from investing behaviour, pensions, product design, and diversity.
With their behavioural economics training, our graduates from both the MBA and Rotman Commerce programmes go on to successful careers in a wide range of fields including consulting (behavioural practice, or analytics), financial services (wealth management, retail banking), marketing (retail, brand, customer experience), and government (policy, programme design).
(The author is professor of Marketing at Rotman School of Management and Member of the Behavioural Economics in Action Research Cluster, Canada Research Chair in Behavioural Science and Economics)


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