Behavioral Economics and Consumer Protection

Seduction by Contract: Law, Economics, and Psychology in Consumer Markets

By Oren Bar-Gill

(Oxford University Press, 280 pp., $40)

WHAT DO people notice? What do they miss? In the late 1990s, the social scientists Christopher Chabris and Daniel Simons tried to make some progress on these questions by asking people to watch a two-minute movie, in which six ordinary people pass a basketball to one another. The simple task? To count the total number of passes.

After the little movie is shown, the experimenter asks people how many passes they were able to count. Then the experimenter asks: And did you see the gorilla? A lot of people laugh at the question. What gorilla? Then the movie is replayed. Now that you are not counting passes, you see a gorilla enter the scene, plain as day, and then pound its chest, and then leave. The gorilla (actually a person dressed up in a gorilla suit) is not at all hard to see. In fact you can’t miss it. But when counting passes, many people (typically about half) do miss it. I confess that when I saw the movie, I was utterly incredulous when asked whether I saw the gorilla. There wasn’t any gorilla! But there was.

Behavioral economists have been much interested in the gorilla experiment, because it shows that people are able to pay attention to only a limited number of things, and that when some of those things are not salient we ignore them, sometimes to our detriment. (Magicians and used-car dealers try to hide gorillas.) The field of behavioral economics is no longer an invisible gorilla, limited to obscure academic journals. On the contrary, it is highly salient. It has produced a number of best-sellers, including Daniel Kahneman’s Thinking, Fast and Slow and Dan Ariely’s Predictably Irrational. There is even a Behavioral Economics for Dummies. In the media and in the business community, behavioral economics seems to be everywhere. YouTube has over 1,600 videos on the topic. It also has the invisible gorilla experiment—but now that you know the gorilla is there, you will see it.

Policymakers are certainly paying attention. In the United Kingdom, Prime Minister Cameron has gone so far as to create a Behavioural Insights Team, located in his Cabinet Office. The official website states that its “work draws on insights from the growing body of academic research in the fields of behavioural economics and psychology which show how often subtle changes to the way in which decisions are framed can have big impacts.” The Team has used these insights to spur new initiatives in numerous areas, including smoking cessation, energy efficiency, organ donation, consumer protection, and compliance strategies in general.