Cass Sunstein’s Required Reading

by Theodore Kinni

strategy+business, Feb 24, 2016

Legal scholars rarely attract much attention in the business world. But Cass R. Sunstein is a notable exception to the rule. That’s because the Robert Walmsley University Professor and director of the Program on Behavioral Economics and Public Policy at Harvard Law School has long explored the intersection of behavioral economics, cognitive psychology, and public policy — three disciplines that have many implications for corporations.

Sunstein is best known among businesspeople as the coauthor, with University of Chicago economist Richard Thaler, of Nudge: Improving Decisions about Health, Wealth, and Happiness (Yale University Press, 2008). In it, the duo describe how choice architecture — the way in which options are presented — affects how people make decisions. They advocate for embedding unobtrusive, non-mandatory “nudges” in choice architectures to encourage people to make healthier, more financially sound decisions. Subsequent concerns about the potential misuse of nudges (as a tool for manipulation and marketing) prompted Sunstein to launch new explorations into the ways and means of choice architecture. He presented those findings in two more recent books: Why Nudge? The Politics of Libertarian Paternalism (Yale University Press, 2014) and Choosing Not to Choose: Understanding the Value of Choice (Oxford University Press, 2015).

Concurrently, Sunstein teamed up with University of Chicago psychologistReid Hastie to explore another topic of perennial interest to corporate leaders. In Wiser: Getting Beyond Groupthink to Make Groups Smarter (Harvard Business Review Press, 2015), they delved deep into the various errors that can arise in group-based decision-making and offered techniques and tactics for avoiding them.

In addition to building an impressive academic career and a list of published works that includes more than 40 books, Sunstein also served in the Obama administration as head of the White House Office of Information and Regulatory Affairs from 2009 to 2012. In that position, he oversaw the approval of new federal regulations and was charged with confirming that they would do more good than harm.

When I asked Sunstein to share the books that most influenced his thinking on choice architectures and decision making, he offered the following titles and summaries of their contribution.

Quasi Rational Economics, by Richard H. Thaler (Russell Sage Foundation, 1991). “This collects many of Thaler’s greatest hits, in their original form: People dislike losses more than they like corresponding gains; they use separate mental accounts for money (vacation money, retirement money, spending money, savings); they care about fairness. The book contains the foundations of behavioral economics, along with a clear understanding of how people deviate from economic rationality. It's an eye-opener, and Thaler is a funny, brilliant, and terrific writer.”

Why Wages Don't Fall During a Recession, by Truman F. Bewley (Harvard University Press, 1999). “Bewley went into the field during and after the recession of the early 1990s to get to the bottom of wage rigidity. He discovered through hundreds of interviews with recruiters and leaders in business and labor that wages don’t fall in lockstep with falling demand, because people want to be treated fairly and they’ll punish their bosses and employers if they feel mistreated. That’s a major finding, which bears on economic behavior in general: Fairness matters. This is a thick book, but it is full of wisdom, and humanity to boot.”

Groupthink: Psychological Studies of Policy Decisions and Fiascoes, 2d ed.,  by Irving L. Janis (Houghton Mifflin, 1982). “This is the seminal work on group decision making, with one of the best titles ever. It’s all about conformity and deference to leaders, and why such deference is bad for organizations. In some ways it’s more like a set of short stories than social science, but they’re terrific stories — the Bay of Pigs, the escalation of the Vietnam War, and the Watergate coverup among them. The book is a warning to all leaders, along with prescriptions for doing better.”

Thinking, Fast and Slow, by Daniel Kahneman (Farrar, Straus and Giroux, 2011). “Already a classic — I think it’s one of the great books of the past 100 years. Somehow Kahneman manages to make every page a pleasure, and there is at least one ‘wow’ every two pages. If there’s one book to read on decision making, and about human foibles, this is it.”