A solid understanding of economics helps students become better citizens and more responsible voters.

Rachel Landsman

"In the neoclassical model of economics, there's a person we call the ‘homoeconomicus' — a perfectly rational, forward-thinking, self-interested individual who researches thoroughly, does complex calculations effortlessly and makes no crazy assumptions," says Professor Rachel Landsman, economics. "But real-life behavior is messy. There's procrastination, bias in information processing, information avoidance, discrimination, concern for others and a host of ego issues behind many economic decisions. That's where behavioral economics comes in."

To make the concepts of behavioral economics clear, Landsman challenges her students to examine their behavior in classic economic experiments such as the dictator game.

"Neoclassical economics predicts that if someone is given a sum of money and told they have the option to share it, most people will keep all the money for themselves," says Landsman. "But that's not what happens. When partnered with someone else, the ‘dictators' usually give some percentage of the money away. Why? What drives this behavior? Is it altruism, a fear of being seen as immoral, or something else?"

Another game Landsman commonly uses in her Introduction to Economics course demonstrates the tragedy of the commons, which posits that individuals acting strictly according to self-interest eventually deplete a shared resource. Landsman's version of the game has her students playing for extra-credit points, which represent their pool of shared resources. If the pool heads toward depletion, students must develop rules and policies to safeguard against collapse.

"The policies students develop, such as the ones to prevent over-depletion, are often the ones they'll read about later in textbooks," she explains. "But I want them to get there through direct experience first. That way they gain a real understanding."

Much of Landsman's research focuses on gender differences in the labor market. For instance, she has studied factors that contribute to higher departure rates among top-level female managers relative to males. Her data indicates that female executives are more likely to leave their positions, not simply because of any difference in ability, external hire rates or fertility, but also because they are more likely to suffer from misplaced blame — for example, attribution bias, self-attribution bias or unreasonable performance standards.

"Policies aimed at closing the gender gap in departure rates cannot simply focus on female leadership training or childcare concerns," says Landsman. "It's important for young women to understand these factors as they prepare themselves for future careers."

Posted September 2018