Carnegie Mellon University

Behavioral Economics

December 21, 2016

Carnegie Mellon Launches First-of-its-Kind Behavioral Economics, Policy and Organizations Major

Trained Behavioral Economists in High Demand by Government, Non-Profit and Industry

By Shilo Rea

Recently, there has been an explosion of interest by government, non-profit and industry organizations to hire trained behavioral economists. Governments seek to use behavioral economics to inform public policy and improve the effectiveness of governmental organizations. In industry, it is used to position brands, inform product design, adjust hiring and performance evaluations, motivate employees and improve the quality of employee savings, retirement and health plan decisions.

To meet this demand, Carnegie Mellon University has created the first and only undergraduate major in behavioral economics. The Bachelor of Arts degree in behavioral economics, policy and organizations (BEPO) will train students to apply psychological insights to human behavior to explain and predict economic decision-making.

BEPO students will learn about behavioral economics at the institution responsible for pioneering the field; the late Herbert Simon, a Nobel Prize and Turing Award winner and CMU professor, coined the phrase “bounded rationality” to describe a more descriptive conception of the limits of human problem-solving ability. Current CMU Professor George Loewenstein is considered a co-founder of behavioral economics and is a renowned expert in a wide range of subjects, including decision making over time, bargaining and negotiations, psychology and health, law and economics, the psychology of adaptation, the role of emotion in decision making, the psychology of curiosity, conflict of interest and "out of control" behaviors such as impulsive violent crime and drug addiction.

Offered through the Dietrich College of Humanities and Social Sciences’ Department of Social and Decision Sciences, BEPO is now available to current and future CMU students. It complements SDS’ highly sought after Ph.D. program in behavioral decision research, which has alumni working at Facebook, Google, Fidelity Investments, Mckinsey & Company, the newly formed Consumer Financial Protection Bureau and a number of non-profits, startups and consulting firms.

“We have a large group of top-notch faculty in behavioral economics, and I am delighted that they will channel this expertise into this exciting, forward looking program,” said Richard Scheines, dean of the Dietrich College. “Along with excellent undergraduate programs in economics and joint majors in economics-statistics and in economics-math, this interdisciplinary major in behavioral economics gives Carnegie Mellon a very broad and deep set of undergraduate degrees in economics.” 

In addition to Loewenstein, students in the BEPO major will study under and have the opportunity to work on research projects with world class behavioral economists, including Linda Babcock, a prominent gender discrimination in the workplace expert who also focuses on behavioral labor and economics and negotiation; John Miller, whose research interests include bidding behaviors in auction markets and the dynamics of political platforms in spatial elections and of price formation in simple markets; Saurabh Bhargava, who examines barriers to enrolling in social service programs, the social and economics factors that affect happiness, factors that influence job searches and wage expectations of the unemployed; and Alex Imas, a rising star in behavioral economics who studies risk taking in financial markets, how social concerns and emotions influence decision making and preferences and self-imposed mental accounts and risk attitudes.

Additional faculty members with expertise in psychology and decision research will also teach in the BEPO program.

“Carnegie Mellon has one of the best groups of behavioral economists in the world.  We are excited to introduce this new major and involve undergraduates in our groundbreaking research. Our faculty are actively partnering with numerous governments and companies to bring behavioral economics insights into these organizations, and undergraduates will participate with faculty on these applied projects,” said Babcock, head of the Social and Decision Sciences Department and the James M. Walton Professor of Economics.

The BEPO curriculum is interdisciplinary and will give students a firm foundation in economics and psychology as well as how to integrate the two perspectives. Students will also take calculus and have a solid grounding in quantitative methods and experimental design, both in the laboratory and field.

To celebrate BEPO, the Social and Decision Sciences Department will host "Behavioral Insights in Action," an afternoon of panel sessions and networking activities on Friday, Feb. 3 in Hamburg Hall 1214. The event will also feature experts from government organizations such as the World Bank and the Lab @ DC and companies like Disney and Voya Financial talking about how they use insights from behavioral economics and psychology in their organizations.

Loewenstein will give a keynote talk on "The NEW New Economics of Information" in which he will present findings from new lines of research, much of it conducted with students and colleagues in Social and Decision Sciences, all dealing with the psychology and economics of information, and all of it challenging traditional economic accounts of how people deal with information. In some cases, motivated by curiosity, people seek out information that has no value for decision making. In other situations, if it threatens to be painful, people avoid information that could inform decisions. And, rather than updating their beliefs rationally, people often defend their beliefs as they would defend material possessions.

Space is limited at Behavioral Insights in Action; Registration is required.