Interview With Richard John, Professor of Psychology, USC

Interviewer: Mark Moore, Professor (Teaching) of Economics, USC Fall 2022

Mark: Today we have with us Richard John, Professor of Psychology at USC. We’re going to talk about the new major in behavioral economics and psychology and the overlap between the two fields. Welcome, Richard John!
Richard: Good to be here. Thanks, Mark.

Mark: I’d like to start by asking you to describe the area of psychology that overlaps with behavioral economics or economics generally and to distinguish this area from psychology as a general field.
Richard: Sure. It goes by different names, but probably the most common name today is judgment and decision-making. I think it’s a sub-branch of cognitive psychology. There’s just an awful lot of overlap between economics and psychology in this area. They don’t have a Nobel Prize in psychology, but they do in economics. Danny Kahneman, who won the Nobel Prize for work in this area, has always been in a psychology department. He’s a professor of psychology.

Mark: Could you give us an example of one research finding or something in the news where the two fields have overlapped?
Richard: Well, I think a lot of the work related to nudge theory. You know the whole idea of nudging people is something that both psychologists and behavioral economists have thought about and worked on. One particular nudge is called gain loss framing.

Oftentimes, if we want people to take protective action, whether it’s related to a disaster or some sort of health mitigation, we give them a risk communication about it,
and oftentimes it’s framed in what I’ll call a loss frame. It’s partly just to warn people that if you don’t evacuate, if you don’t mitigate against the earthquake, if you don’t get regular screenings by a doctor, and so on, then bad things are likely to happen to you, or could happen to you. That’s a loss frame, because it’s all related to the status quo,

And it turns out, from the work that Kahneman and Tversky did in prospect theory,
that people generally are risk seeking when you think about decisions in a loss frame like that. People are going to say, well, I’ll take the gamble. I’ll take my chances on the earthquake or the for the flood, or the hurricane, or not going to the doctor.

So what you want to do is create a gain frame for people. You want to set it up so the reference point is much lower to start with. And so in essence these actions will benefit you in a positive way, and you really end up with a game, which economists and Bernoulli have talked about—the fact that people are risk averse when you talk about games.

Mark: It seems like there are clear applications to promoting vaccines for COVID-19 and other kinds of behaviors to reduce transmission of the disease.
Richard: Absolutely. I actually had an undergraduate honors student in the psychology program, and she did exactly that. We did the Covid vaccine decision for individuals as a gain or loss frame and found a pretty significant change in behavior between a gain frame or a loss stream.

The gain loss result is an incredibly robust finding. It’s hard to find literature where if you actually move the reference point, you don’t get that finding.

Mark: Can you talk about how this field developed?
Richard: I actually worked with Ward Edwards, who was a former faculty member of USC. Some would describe him as the grandfather of behavioral decision making or even behavioral economics. He was a psychologist. But if you read his early papers he sounds more like a behavioral economist. For example, one of his requirements in doing experiments usually was to incentivize his participants, and this is something that psychologists don’t particularly consider important. He wrote papers explaining how incentivizing people actually instructs them on what the trade-offs are or their response. So, for example, if you think about a perceptual task, you can go quickly and make lots of errors, or you can go slower and make fewer errors. And psychologists really don’t think very in much detail about that trade-off.

Ward wrote about how to instruct people and incentivize them, so that that trade-off is really explicitly known to the subject, and I think that’s very much in the spirit of behavioral economics. One of the differences between behavioral economics and psychology is that behavioral economists absolutely require that your participants be incentivized in some way, and psychologists not so much.

Another key difference between behavioral economics and psychology is that behavioral economics and all of economics absolutely forbids any sort of deception in experimental research. I have a perspective on a deception that I would say is tolerant of deception. But I understand where the behavioral economists are.

Mark: I think, as economists, we think about how the field has been influenced by the interaction with psychology, but is there a change in the other direction? Are parts of psychology changing in some way as a result of this interaction?
Richard: That’s a great question. I will say that I think one difference between the fields maybe is not converging. There are a group of psychologists—mostly in cognitive science—that use computational models, but in the mainstream of judgment and decision making a lot of studies are much more descriptive of what people do. In economics, everything begins with the model.

Mark: Could you tell us about some of your recent research?
Richard: I recently did a study with Adam Rose, an economist at the Price School. We were looking at the effects of COVID on the economy. One of the aspects that I was involved in was to try to model consumer participation in the economy during the pandemic, and to do that we did a survey where we asked people in ten different areas whether their participation was affected by COVID or not, and how it was affected.
And we actually produced data that were, I think, very, very valuable for the economic model, which was really the driver. But one of the things we discovered in the meantime is that there’senormousvariations. Wehaveanaturalexperimentintermsofhowdifferentstates and different communities dealt with the pandemic in terms of mandated closures and rules about people interacting. Somewhat surprisingly, generally the behavior that people were instructed to engage in doesn’t produce as big a difference in the outcome of the pandemic in terms of lives lost, as you might expect.

One of the things that we’re exploring with our data from that study is the extent to which two effects could have basically attenuated those expected differences. One is non- compliance. The other is the fact that the people living in areas where mandates were less severe or non-existent, and yet they voluntarily engaged in avoidance behavior.

Mark: How did you get involved in this field? Have you always been interested in the behavioral economics overlap, or did something trigger it in some way? Were you nudged? Richard: No, I’ve always been in this field more or less. I was an applied math major in college, and there were two things that really interested me. One was probabilistic models, and so I took undergraduate courses in game theory and decision theory, and of course, probability and stochastic processes. But I was also interested in psychology, and at the time there were computational models of memory processes and simple decision-making processes.

So when I looked for a graduate school I found Ward Edwards. He was very interested in applications. And that’s kind of how I grew up as a student and young faculty member. I was thinking about the theory and the experimental work because I was trained as an experimental, cognitive psychologist, but also thinking about how to apply this stuff in the real world.

I never was in an economics department. A lot of the applications I’ve worked on have been public policy or engineering, not so much economics for profit kinds of applications.

Mark: So to add to that, what keeps you going in this field?

Richard: I just see an endless flow of ideas and topics that I want to explore. And you know, I think part of part of that is continuing to work with students, undergraduate and graduate students. I usually pick up two or three undergraduates a semester, and they’re incredibly enthusiastic, and they have really interesting ideas that I would never have thought of.

Mark: If students want to work with you to have you direct their research or to become a research assistant, can they just contact you directly?
Richard: Absolutely. I think lately people have found out about my lab through the SURF program, but there is a limit on how many students can be supported in one lab that way. I also supervise students doing research in the psychology honors program.

I think it’s an exciting field. You know I’ve been doing this for a long time, and it’s only getting more interesting. I only wish I could be around for a lot longer to see all the places that it goes. I think that more and more there are places that are hiring people to do this kind of work, to do behavioral economics.

Mark: Thank you so much for being with us today.

Richard: Good to meet you, Mark, and glad to chat with you,