Behavioral Economics and Transportation

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As a man of leisure (a synonym for consultant) I have something that most people who have real jobs do not. I have time to read. One of the most influential books I have had the privilege to read lately is Thinking, Fast and Slow by Daniel Kahneman.

Daniel Kahneman is one of the founders of behavioral economics. The research he, his colleagues and collaborators have conducted on human behavior has fundamentally changed the way we view the choices people make. The result of this research was the Nobel Prize in Economics in 2002. More importantly, the concepts he has researched are highly relevant to transportation managers who are asked to control costs by, for example, consolidating bus stops or changing bell times.

At some point every transportation director, whether they knew it or not, has had experience with two of the most critical insights identified by the research detailed in the book: status quo bias and loss aversion. A simple description of status quo bias is that people do not like change. A similarly simple description of loss aversion is that people react more strongly when something is taken from them than they do when something is given to them. While these descriptions seem simplistic and obvious, the research on these topics and the others in the book can help transportation directors better manage many of the common issues they confront.

For example, the last time you tried to eliminate or change a bus stop, what was the reaction? Did people react negatively? Did they argue that they did not want any changes to their schedule? Congratulations you have experienced loss aversion. How about the last time you tried to change school bell times? No matter how much financial and logistical sense it made was there an outcry? All of you who answered yes have confronted status quo bias.

The combination of these two issues is a key element that makes implementing change so difficult in any organization. While many have felt this intuitively, the research provides significant insight into the cause and impact of these concepts on decision making. For example, the loss aversion research demonstrates that people feel the loss of something about two times as much as they feel a gain. Said more simply, people will be twice as angry if you take something away from them as they will be happy if you give them something. The status quo bias is so powerful because the current condition is assumed as the baseline and any change from that baseline is assumed to be a loss. Therefore, any change would require people to overcome their preference for the current condition and to overcome a sense that the loss is twice is great as any gain they would receive.

How can you a transportation managers use this information to make their jobs simpler? As you can imagine, the first way is to be very cautious about the exceptions that are allowed in your district. Remind your Superintendent, Business Manager or School Board that takeaways are twice as painful as giveaways no matter how simple an exception seems to be. A second option is to create conditions that start from the endpoint you want to obtain. Options for transportation managers include a requirement to opt-in to transportation where district policy and state law allows is a method that can address both the status quo bias and loss aversion. Carefully developing options that create a most beneficial scenario in items like bell time changes and stop changes can also be used to address the typical reactions associated with status quo bias and loss aversion.

Transportation directors, almost more than any other personnel in a district, are often called on to be pseudo-psychologists to deal with the varied people they must interact with on a daily basis. Thinking, Fast and Slow can help transportation directors by taking very complex human behaviors and providing samples and research that makes them seem obvious. If you ever have some free minutes (make it a lot of minutes because the book 700-plus pages) do yourself a favor and pick up this terrific book. 

Tim Ammon is a consultant with School Bus Consultants, LLC, in Annapolis, Md., and is a regular presenter at the STN EXPO Conference. He has extensive experience working with districts across North America on all aspects of transportation operations.