Behavioural Science is a rapidly expanding field and everyday new research is being developed in academia, tested and implemented by practitioners in financial organisations, development agencies, government ‘nudge’ units and more. This interview is part of a series interviewing prominent people in the field. And in today's interview the answers are provided by Peter Wakker.
Peter is professor of decision under uncertainty at the Erasmus School of Economics (ESE). He works in behavioural economics, specifically looking at risk and ambiguity. He has published in leading journals in economics, business, medicine, psychology, statistics, and mathematics. He was the best-publishing Dutch economist in 1994, 1998, 2003, and 2007, and collaborated with three Nobel-prize winners. Peter also received a Medical Decision Making Career Achievement Award (2007), the Frank P. Ramsey Medal (2013; highest award of INFORMS Decision Analysis Society), and an Honorary doctorate in economics (University of St. Gallen 2016). He frequently gives advices on insurance in the media. He is a director of the research group Behavioral Economics
Who or what got you into behavioural science?
I started as a student in mathematics and I was interested in probability theory and statistics. But when I learned about statistics, looking at p-values and so on, I found it weird. So, I talked with my teacher and he told me that my ideas were Bayesian. He then gave me some literature that I found great. I came to think that I should convince all of mankind to become Bayesian, including all statisticians. So that's how I came in.
The leap from statistics to behavioural science is not big. How people usually do statistics did not seem to be rational to me. They should do it differently. This difference between normative and descriptive was the beginning of my research. It aligns well with behavioural science. This is not exclusive to behavioural science either. Irrationalities are also studied in marketing and psychology. Already long before behavioural science came into being. What distinguishes behavioural science is that we also relate to economic theories, seeing how the descriptive models are different from the normative models.
What are you proud of of having achieved as a behavioural scientist?
Unfortunately, the papers that I think best are not quite the papers that are most read or most cited. So, there's already a discrepancy. But the paper I'm most proud of is a paper that I'm about to complete together with three others, which reflects our long thinking on ambiguity (risk but with probabilities unknown), in which we show a better framework for understanding ambiguity.
…and what is it that you would still like to achieve? Well, one thing I’d still like to do is I want to write on the foundation of statistics. I have in mind a paper where I make very clear that the classical approach to statistics really is no good and that people should do it the Bayesian way. I’ve had that big ambition since I was 25, now over 40 years ago – it’s an ambitious project!
Another ambitious project is what I call conservation of influence. This conservation principle is similar to the conservation of energy in physics. Where influence should not disappear, regardless of whether it’s driven by transitivity, substitution, etc. I hope that approaching the field from this perspective can help it form a general underlying principle. So, that's another ambitious project that I want to do in the future.
If you weren’t a behavioural scientist, what would you be? Well, I could have gone in other directions. For instance, all my life I have enjoyed zoology. Seeing how animals live has been my big hobby. Before I go to sleep, I watch YouTube documentaries about animal life. Me having ended up in statistics also partially has to do with my teachers. In high school, I had a very good mathematics teacher and a sympathetic but low quality biology teacher. So, that may have determined that I went to mathematics and then to statistics, and not biology.
How do you apply behavioural science to your own personal life?
I try to understand my own emotions better, for example, the emotion of regret. Regret in many ways is a good and useful emotion, but there are forms of regret that are not good, and that are irrational. People are too risk averse. In general, knowing these things helps me see them in myself. I do try to change such emotions. In this sense, I also work on my own life.
With all your experience, what skills would you say are needed to be a behavioural scientist? Are there any recommendations you would make? In many fields it may be good to specialize in theory or experiment. But in behavioural science it is better to combine the two. So, we recommend our students to do both. They strengthen each other. Your empirical work will be better because you know the theory. And your theoretical work will be better because you understand and predict actual behaviour.
How do you think behavioural science will develop (in the next 10 years)? I already predicted much what would happen 40 years ago, as the behavioural approach started mostly in the 1980s. It started in the field of risk, where people wanted to deviate from expected utility. And that’s when the alternative models came. Then I already predicted that researchers would rewrite all of economics using these deviating behavioural models, and that is happening now. It will go on. This was foreseable forty years ago.
In general, I also hope that people continue to bring in psychological insights into economics. Economists are still underdeveloped here and they will benefit much from those insights. That's mostly what behavioural people do. So that's another thing, more psychology being mixed into economics.
What advice would you give to young behavioural scientists or those looking to progress in the field? It's again about grounding yourself in both the theoretical and the empirical. I recommend reading both theoretic work and understanding the theories, and getting to know about the empirical findings that direct the theory. So, both are there and you can study both and do and work on both. We encourage PhDs in our group to do both; read, study, and work on both theoretical papers and empirical papers.
Which other behavioural scientists would you love to read an interview by? I was much inspired by Amos Tversky, but he can no longer be interviewed because he passed away end of the 1990s. Another inspiring person, still alive, is Faruk Gul, an economist from Turkey now in Princeton. He is very creative in his work, like nobody else, with deeper insights than anyone, but we don’t agree on much – he has never done experiments and his models are not empirically realistic.
What are the greatest challenges being faced by behavioural science, right now? Well, every field has to find more applications to sustain itself but in this regard behavioural science is doing well. People are using it in many applications; governments, insights units, corporate etc. There’s no particular challenge coming to my mind now.
Sure, there has been the replication crisis, but this is relevant broader than only for behavioural science. Part of the probem lies in the unsound statistical techniques commonly used, which make it unavoidable that some things go wrong.
What is your biggest frustration with the field as it stands? I am mostly specialized in uncertainty and risk. In that subfield there was a very good researcher (Amos Tversky). He was a good leader giving directions. Which is good. As it is now, we no longer have such a ‘leader’ and we are lacking direction. This is a frustration of mine.
Thank you so much for taking the time to answer my questions Peter.
As I said before, this interview is part of a larger series which can also be found here on the blog. Make sure you don't miss any of those, nor any of the upcoming interviews!
