Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions

HBS Home

  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Campaign
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Executive Education
  • Apply / Log-in
  • Program Finder
  • Subscribe
  • FAQs
Executive Education
Programs for IndividualsPrograms for OrganizationsHBS ExperienceFacultyAdmissionsParticipant Stories
  • Programs for Individuals
    Dropdown
    • Comprehensive Leadership Programs
    • Topic-Focused Programs
    • Regional Programs
    • Virtual Programs
    • Certificate of Management Excellence
    • Corporate Director Certificate
  • Programs for Organizations
  • HBS Experience
    Dropdown
    • The Value
    • The Learning Experience
    • The Virtual Experience
    • Alumni Network
    • Admitted? Plan Your Stay
    • Insights
  • Faculty
  • Admissions
    Dropdown
    • Admissions Requirements
    • Admissions Process
    • International Applicants
    • Payment, Cancellation, and Deferral
    • Already Admitted
  • Participant Stories
Executive Education
    Harvard Business School Right arrow Executive Education Right arrow Insights Right arrow Ask The Expert
    Harvard Business School Right arrow Executive Education Right arrow Insights Right arrow Ask The Expert

    Ask The Expert

    Professor Beshears fields questions about his research on behavioral economics.
    Ask The Expert
    Professor Beshears fields questions about his research on behavioral economics.
    Download Brochure
    Featured Program
    Behavioral Economics: Understanding and Shaping Customer and Employ...
    Date

    17-22 OCT 2021

    Format

    In-Person

    Location

    HBS Campus

    Create more value by shaping the conditions that can alter customer and employee decision-making in powerful and often surprising ways.
    Program Details
    Need Help? Contact Us:
    Program Advising team
    Email: executive_education@hbs.edu
    Program Finder
    Featured Program
    Behavioral Economics: Understanding and Shaping Customer and Employ...
    Date

    17-22 OCT 2021

    Format

    In-Person

    Location

    HBS Campus

    Create more value by shaping the conditions that can alter customer and employee decision-making in powerful and often surprising ways.
    Program Details
    Download Brochure
    Program Finder

    Professor John Beshears, faculty cochair of the Behavioral Economics: Understanding and Shaping Customer and Employee Behavior Executive Education program, has conducted extensive research on behavioral economics, the field that combines insights from psychology and economics to analyze individual decision making and market outcomes. Our Facebook fans asked Professor Beshears questions about his research. See below Q&A for his responses.

    What are some of the biggest mistakes people make when facing a big decision?

    One enormous mistake people make is failing to notice that they are facing a big decision in the first place, and as a consequence failing to take action. For example, most people acknowledge that saving for retirement is important, but when they start working at a new company, it can take them months or years to sign up for the 401(k) retirement savings plan. In this case, many people are failing to pay attention to the fact that they are implicitly choosing not to save for retirement. Furthermore, even when the 401(k) plan enters their mind, they may not think that they are facing a big decision—they can always join the plan next month, after all—and they procrastinate instead of taking action. Inertia is a major obstacle standing between people's good intentions and good outcomes.

    Another mistake I see frequently is people's tendency to adopt an egocentric perspective. When people decide on a strategy for an important negotiation, for example, they often focus on what they want to get out of the negotiation and what their alternatives are if they are unable to reach an agreement. It is just as essential, however, to think about what the other side wants and what the other side's alternatives are. As soon as a negotiator analyzes the situation from the other side's perspective, it is easier to reach an agreement that gives the other side something they value and that induces the other side to provide something of value in return.

    Those are just two major mistakes that people make. If you're interested in seeing a more extensive discussion of people's systematic errors, I highly recommend Max Bazerman and Don Moore's book "Judgment in Managerial Decision Making".

    What's your favorite example of a rule or a guideline or "guardrail" that a business leader can put into place to avoid behavioral bias in their own decision making?

    Here's a powerful "guardrail" that can help a business leader overcome the dangers of adopting an egocentric perspective: appoint a devil's advocate in key deliberations. The devil's advocate is charged with coming up with compelling arguments against the course of action that is currently favored. It's important to make sure that the devil's advocate feels genuinely appreciated for asking tough questions and offering strong resistance. Having someone who is explicitly charged with the task of taking alternative perspectives helps to circumvent the problems associated with egocentrism. For more details on this approach, see Cass Sunstein and Reid Hastie's HBR piece "Making Dumb Groups Smarter". In addition, Francesca Gino and I suggest a wide range of "guardrails" in our HBR piece "Leaders as Decision Architects".

    How do you see behavioral economics playing a role in how people save for retirement?

    Retirement savings has been a major success story for behavioral economics. To turn the inertia that I mentioned above on its head, a lot of companies are automatically enrolling their employees in 401(k) retirement savings plans. Employees who do not wish to enroll are free to opt out, but those who might not have gotten around to enrolling begin saving in the plan at a reasonable default contribution rate almost immediately after they are hired. Automatic enrollment makes a night-and-day difference in plan participation rates.

    Here's where I think the role of behavioral economics will continue to evolve in the retirement savings space. First, just because money goes into a retirement plan, it is not necessarily the case that money stays there until retirement. A lot of people withdraw savings from their retirement plans well before retirement age (see the Finance and Economics Discussion Series (FEDS) working paper). Many of these withdrawals occur at appropriate times, for example when someone experiences a job loss, but maybe behavioral economics techniques can be used to help people build up rainy day funds, which would provide a cushion to fall back on in emergencies and would preserve retirement account balances for the long run. Second, if people reach retirement age with a nice nest egg, what do they do next? Behavioral economics tools can help retirees manage the process of drawing down their savings. We are starting to see more financial products in retirement plans that simplify this complex set of decisions for people.

    How does the Affordable Care Act change the behavioral economics of healthcare as an industry?

    The Affordable Care Act has changed the landscape of the healthcare industry in a number of different ways, but perhaps the most interesting implication of the Affordable Care Act from a behavioral economics perspective is that millions of people are now obtaining health insurance in the individual market (as distinct from employer-provided insurance) through health insurance exchanges. The exact design of these exchanges has an important impact on the type of coverage people obtain. My friends Keith Ericson and Amanda Starc have spent a lot of time studying health insurance exchanges (see "Designing and Regulating Health Insurance Exchanges: Lessons from Massachusetts"), and here I rely on their insights. The health insurance exchanges group insurance plans into tiers (bronze, silver, etc.), with each tier associated with an approximate level of insurance coverage, and this format helps consumers compare the different plans available to them. Instead of trying to understand the complicated financial terms of different plans (which people find very difficult—see my research "Consumers' Misunderstanding of Health Insurance"), people can focus on attributes like provider network and price while knowing that the tier summarizes approximately what fraction of the cost of healthcare is covered by the insurance company and what fraction the consumer will pay out of pocket. Unfortunately, it is not clear that consumers make appropriate tradeoffs between the different plan attributes, even when the tier system makes comparisons easier. For instance, people may choose the plan with the lowest premium (up-front price) because they do not fully appreciate the financial risk that they are taking on as a result. As the different states set up exchanges with slightly different rules, we will get to see which designs are best at helping consumers make wise health insurance choices.

    ApplyDownload Brochure
    ApplyDownload Brochure
    ApplyDownload Brochure
    More Admissions Information
    Download Brochure
    Featured Program
    Behavioral Economics: Understanding and Shaping Customer and Employ...
    Date

    17-22 OCT 2021

    Format

    In-Person

    Location

    HBS Campus

    Create more value by shaping the conditions that can alter customer and employee decision-making in powerful and often surprising ways.
    Program Details
    Need Help? Contact Us:
    Program Advising team
    Email: executive_education@hbs.edu
    Program Finder
    Featured Program
    Behavioral Economics: Understanding and Shaping Customer and Employ...
    Date

    17-22 OCT 2021

    Format

    In-Person

    Location

    HBS Campus

    Create more value by shaping the conditions that can alter customer and employee decision-making in powerful and often surprising ways.
    Program Details
    Download Brochure
    Program Finder

    View Frequently Asked Questions

    Subscribe to Our Emails

    Back to Top Arrow up

    ǁ
    Campus Map
    Executive Education
    Harvard Business School
    Soldiers Field
    Boston, MA 02163
    Phone: 1.800.427.5577
    (outside the U.S., dial +1.617.495.6555)
    Email: executive_education+hbs.edu
    →Virtual Tour
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College