Shafir brings behavioral input to D.C.

“When some students say that lectures are not well organized, I just crack up. When they are in my class and buying shoes online, how would they know?” he said. “Either they are buying the wrong shoes or having no idea what I am saying, but to think that they can successfully do both is completely wrong.”

A behavioral scientist, Shafir has extensively explored the common tendency to grossly overestimate one’s own ability to divide attention, an area of research he will bring to the White House as the first academic member on President Barack Obama’s Advisory Council on Financial Capability, which aims to develop formal policy recommendations to help Americans make better and more informed financial decisions. The White House announced Shafir’s appointment on Jan. 23.

The council was established in 2010 following the passage of consumer protection legislation. Obama then appointed John Rogers Jr. ’80 as the chair of the council.

Shafir said he was surprised when he first learned of his nomination over six months ago but considers his membership on the council as a great opportunity to directly contribute to effective public policy.

“In my life as an academic who tries to push forward an agenda where behavioral insight is very important for creating policy, this is a wonderful thing to have because it gives you a podium, and what you say gets more weight,” he explained.

Psychology department chair Deborah Prentice said she believed that Shafir’s behavioral perspective will be immensely valuable to the council.

“Policymakers are increasingly coming to recognize that if they want to create policies that will work — policies that will produce the desired behavior in the most cost-effective way and be feasible to implement — they need the advice of behavioral scientists,” Prentice said in an email.

While the council has focused primarily on improving financial literacy, Shafir said he hoped to emphasize that teaching sound financial management skills is not the same as practicing them.

“We have to be aware that to the extent you train people to have the right intentions, not much will happen if you place them in a context that is not conducive to exercising that knowledge,” he said. “The big challenge we have is to figure out the context in which the American poor function,” he explained.

For those in the upper and middle class, Shafir said, the misconceptions about multitasking are being faced by people who talk on the phone while driving and CEOs who manage multiple aspects of a business at once.

“[These people] are really shortchanging themselves. All of the data coming out shows that multitasking is another word for not paying attention,” he explained.

However, the situation may be quite different for the poorer American who must multitask to make ends meet. Shafir’s latest research on the decisions made by individuals short on time or resources reveals that the perpetual worry of facing scarcity is not conducive to focused long-term financial planning.

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Shafir added that the hard day-to-day struggles of the poor force them to live in a constant trade-off paradigm, which can be distracting, depleting and error-prone.

“When I go around to buy groceries, books or CDs, I never ask myself what I could be buying instead. It is as if I am reaching into an infinite bucket of expenses,” Shafir explained. “The argument is that a poor person does. Every time she buys something above a bagel, she has to consider it carefully.”

In addition to his research at the University, Shafir co-founded Ideas42, a nonprofit think tank based in New York City that develops behavioral interventions in a number of policy areas, including public health, environment, conflict resolution and poverty. He is co-authoring a book with his fellow Ideas42 partner Sendhil Mullainathan, a current visiting fellow at Princeton’s Center for Health and Wellbeing.

Although a psychologist by practice, Shafir was drawn into behavioral economics by the nature of his research on decision-making.

“I inhabit a world now that is inherently related to behavioral economics. When I had to start looking at rational agent theory versus heuristics, biases and errors, economics was a natural place to go,” he said.