Behavioral Economics: The Leader as Decision Architect - Harvard Business School MBA Program

Behavioral Economics: The Leader as Decision Architect

Course Number 2235

Professor Max Bazerman
Professor Mario Small
Spring; Q4; X 1:55 PM - 3:15 PM
14 Sessions
Course Project

Educational Objectives

The course is designed to provide a user’s guide to the rapidly developing field of behavioral economics. The course will focus on the leader, not only as a decision-maker, but as the architect of the decisions of many other people - subordinates, customers, investors, and citizens.

Content and Organization

This course aims to help students (a) improve their ability to make decisions effectively and (b) understand how to create environments that encourage others to make wiser decisions. Students will be exposed to social science research on the psychological, sociological, and economic processes that shape decision-making, including the many factors that get in the way of people’s ability to make rational decisions. Students will learn how to structure organizational or institutional environments that encourage wiser, fairer, or otherwise better decisions by others, including employees, clients, customers, counterparts in other organizations, and the public at large. The course will examine the barriers that may affect a leader’s ability to construct effective decision-making environments for others, and discuss strategies for overcoming those barriers. Topics may include risk and loss aversion, inattention, memory, context-dependent preferences, multiple kinds of biases, networks, organizational norms, default options, consideration sets, choice architecture, unintended consequences, fairness, short-vs-long term relationships, the public good, and ethics.

The course is structured around three modules: (1) Understanding decision-making behavior. How do people make decisions?  This module examines the psychology and sociology of decision-making, emphasizing the many ways that, in their everyday lives, people make decisions inconsistent with expectations of rationality. (2) Creating environments. What strategies can leaders use to design and build environments conducive to wiser decisions?  This module explores the construction of environments that encourage others to make wiser decisions, through processes that include nudges, incentives, and organizational restructuring. (3) Managing barriers. What questions must leaders consider when creating decision-making environments in real-life contexts? This module considers the questions leaders must consider when managing the complexity of real-life environments, including whether an existing environment has good reasons for its current structure, whether an intervention is actually needed, what kinds of unintended consequences an intervention may produce, what ethical considerations a leader must take into account, how clear the leader is about what constitutes a wiser decision, and which constituents can or should the leader consider.