What makes people behave the way they do—and to what degree are design choices influencing that? Associate Professor Mike Luca studies the design of online platforms, while Professor Max Bazerman’s work focuses on behavioral economics, ethics, and negotiation. His latest book is Complicit: How We Enable the Unethical and How to Stop. Here, they talk about how the confluence of behavioral ethics and behavioral economics can help shape our understanding of these questions and inform platform design.

The field of behavioral ethics is fairly young. Max, can you tell us about its evolution?

Max Bazerman: It might be easiest to talk about two periods of time: the 2,500 years that led up to Enron and the 20 years since then. For 2,500 years, ethics was in the hands of philosophers, and they provided lots of insightful ways of thinking about what optimal human behavior looked like. But what they outlined was too demanding for many of us, and none of us could live up to the standards they defined. And then there was the jolt of Enron, and a bunch of other ethical scandals, too, and the world started looking at business schools, and said, What are you doing, and how are you training these people who are creating these disasters?

Over the last 20 years, business schools have responded, certainly with some teaching of basic philosophical perspectives. But if there’s been a big shift, it’s been in the world of behavioral ethics. That is the psychology of how we actually behave. One of the interesting aspects here is that people don’t live up to the standards that we think we should. It’s not just that I don’t live up to the standards that Mike tells me I should have—I don’t live up to the standards that I think I should have. This basic notion of how to bring more insight about how people actually behave from an ethical perspective, with an eye toward helping them make better decisions, is a large part of what the behavioral ethics world has been up to over the last couple of decades.

And Mike, you’ve studied behavioral economics in the tech sector. How are these ethical issues manifesting there?

Mike Luca: Tech companies shape the information we see, the products we use, and the markets we participate in. This raises important societal questions about the decisions business leaders make. Is Airbnb facilitating discrimination? Are hidden fees leading customers astray? Are fake reviews undermining customer trust? Is social media making us less happy?

Executives can’t sit on the sidelines when it comes to answering questions like this. Business leaders can take steps to quantify their impact on the world. This enables them to put guardrails in place to avoid unintended consequences and to increase their positive social impact.

Bazerman: What I find fascinating about Mike’s work in the tech sector is this: These decisions that business leaders are making affect not just website functionality but how lots of people experience a site. Lots of people make important decisions in the world—doctors, lawyers, diplomats all make important decisions. But business leaders are deciding how thousands or millions of people end up using a platform. Mike’s work with Airbnb is an example. He documents how Airbnb created a website that contributed to an environment where hosts ended up discriminating against particular groups of guests. That gives us fascinating insights about how something seemingly innocuous like web design has enormous potential to lead users in either a positive or negative direction. For me, that’s a critical connection between the offline and online worlds.

Luca: Platforms such as Amazon, Google, and Airbnb make important decisions about the information and options that are being shown to users. Done thoughtfully, these design choices can offer customers a broader set of products, high-quality products and services, and more competition. But decisions can also have important unintended consequences.

In the example of Airbnb to which Max is referring, my collaborators (Ben Edelman and Dan Svirsky) and I were struck by the fact that Airbnb was allowing hosts to accept or reject a guest on the basis of limited profiles, which often consisted of little more than a picture and the name of a guest. This was a different choice architecture than in earlier platforms like Priceline, where transactions were more automated. We were worried that Airbnb’s strategy could give rise to discrimination on the platform, so we ran an audit study.

After we documented widespread discrimination on Airbnb, someone at the company reached out to me to better understand what steps they might take to reduce discrimination on the platform. In the years since, my collaborators and I have developed frameworks to help platforms create a more inclusive ecosystem. In the case of Airbnb, you could imagine changes like more instant bookings and not showing people’s pictures up-front. Once you start thinking about the problem, there is a wide range of solutions that could reduce discrimination. Airbnb has now implemented a series of changes, including some of the ones I have proposed. And other companies like Uber and LinkedIn have also become more proactive about creating inclusive ecosystems.

Bazerman: Our discussion has been about ethics, but Mike and I are also connected to the broader world of behavioral economics, and I see a confluence of these emergent ideas of behavioral economics, experimentation, and behavioral ethics. More people are interested in understanding how people actually behave, instead of living with the standard assumptions that economists have made for decades, and people are interested in using data to find out what works. Experiments end up being the gold standard for finding good evidence to change behavior.

Luca: The increased use of experiments has been exciting both for managerial research and for companies looking to solve problems. It’s not just about having more data; it’s about combining causal inference and analytics with sound managerial judgment. If you look at the settings in which Max and I have been involved, it’s not that organizations weren’t using data; they were. But the economics and behavioral science tool kit can help business leaders get more out of data. This is a theme I’ve seen in my research on platforms, including Airbnb, Facebook, Instagram, Yelp, and Wayfair.

There are lots of exciting opportunities beyond platforms as well. For example, one company recently found that increasing pay for lower-wage employees increased productivity and lowered turnover enough that it turned out to be more profitable than keeping lower wages. If you look around, you can find data-driven opportunities to help customers, help your employees, and help other stakeholders, while also helping the company to thrive.

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