Working Group on Prescriptive Economics

Behavioral economics has revolutionized economic studies by showing how, in reality, people do not act in the rigidly self-interested, incentive-driven way that conventional economic models suppose. But beyond models and theory, behavioral economics also has important practical applications. The effectiveness of a given social or economic program is influenced by the details of its design, such as whether participation is framed in positive or negative terms, whether people are automatically enrolled or must choose whether to opt in, and how large an array of choices is given to program participants.

With support from the Foundation, economist Sendhil Mullainathan has established a working group that will study and test program designs based on behavioral economic principles in a variety of field settings. Prescriptive economics, as Professor Mullainathan describes the field, has dealt with issues as varied as enrollment in pension programs to the decision of women to undergo a mammogram. The working group, consisting of six economists and three psychologists, will meet regularly over the next several years to work out specific program designs employing psychological principles and then test them in randomized field experiments. The kinds of projects that the group plans to explore include programs to increase the use of checking accounts by the poor, programs encouraging taxpayers to save a portion of their federal tax rebates, pre-release programs to decrease recidivism among ex-prisoners, programs to improve portfolio decisions in retirement pension accounts, and programs to increase participation in the Medicare prescription drug benefit.