Episode #12 -Ceteris Paribus (and Other Economic Principles for Insights)
In this episode of the MRX Lab podcast from FlexMR, we talk about the economic principles that are relevant to the insights industry. We start by defining the key differences between behavioural and more traditional economics, as well as exploring how the two fields have blurred lines of enquiry in the past.
Over the second half of the episode, we dive into a number of key economic ideas and how they relate to the work researchers undertake – from marginality to calculating cost, understanding the trade-offs people make to how incentives change behaviours. Importantly, we draw conclusions about the value of both the rational and irrational consumer mind.
It’s common to hear that the way to get a seat at the C Suite table is by speaking the language of finance. Researchers are told that executives make decisions based on calculations, risk and returns. A common thread of logic is marketing and research just don’t get that language, and that’s why professionals shut out. But that’s an old way of thinking. Modern firms understand the value of creativity, of customer and consumer opinion – they need to. Because in the crowded marketplaces of the 21st century, any advantage – whether based on creativity or knowledge – is to be coveted.
Equally, however, that’s also not to say that there isn’t value to be found in studying the principles of that financial language which do also still hold a place in the executive decision making process. In fact, the insights industry already has a toe dipped in this water with behavioural economics.
Behavioural economics is the study of psychology as it relates to decision making processes. At odds with traditional economics, this field of study suggests that people do not always make the most rational decisions available to them. It even goes so far as to suggest that people are incapable of making rational decisions.
One of the most famous principles to emerge from this field is that of the nudge. Nudge theory posits that its more effective to subtly lead people to desired behaviours through positive reinforcement and indirect suggestion than other methods. It has become popular in social sciences in politics – and has reportedly been used by both David Cameron and Barrack Obama to help implement domestic policies. But reports that nudges may have also been part of the UK governments 2020 coronavirus strategy have also shown its limitations and challenges in producing short term effects.
Traditional economics also has a great deal that is worth studying however. From the concepts of all else being equal to the interconnectivity between all factors in determining an outcome. Much of what can be learnt from the basic principles and systems that govern the rational world of economics seems common sense and yet is still so frequently overlooked.
To deliver impactful results that influence C-Suite decision making, we – as researchers – should be comfortable discussing both sides of human nature; the rational and the irrational alike.