Behavioral Economics 3.0: Navigating real-world decision-making
Jun 2025
Enabling world-class research
How can behavioral economics solve real-world challenges in decision-making, from health and wealth to societal policies? With the rise of Behavioral Economics 3.0, UBS Foundation Professor Sandro Ambühl addresses complex questions on how to improve choices, evaluate policies, and engage individuals on critical issues like retirement savings. Through a blend of theory and empirical research, his work aims to shape better, evidence-based decisions.
Pressing challenges to address
- How can we assess if decisions are good or bad?
- How to ensure attempts to help don’t unintentionally harm?
- How to engage those most resistant to change?
Improving decisions in health, wealth, and happiness
The main goal of my research is to help people make better decisions about key aspects of life, like health, wealth, and happiness, as famously discussed in Nudge by Thaler and Sunstein. However, we face three fundamental challenges in this field. The first challenge is determining whether a decision is truly good or bad. We cannot directly know how someone feels about a choice, and outcomes are often unpredictable – good decisions don’t always lead to good results, and bad decisions sometimes yield surprisingly positive outcomes.
The second challenge is the concern that even well-intended experts and policymakers aiming to help people make mistakes themselves. If people are prone to poor decisions, how can we ensure that those in charge are not similarly flawed? This is a central critique of behavioral public policy: while it’s aimed at improving outcomes, there is always the risk of experts and policymakers misjudging what’s best for people.
A third challenge lies in the difficulty of reaching those who make the worst decisions. For example, if somebody is already engaged in retirement planning, it’s relatively easy to encourage them to make better choices. It’s far more challenging to engage those who avoid thinking about retirement planning entirely. Overcoming this resistance requires not just better policy, but also a deep understanding of the psychology of human decision-making.
Sound methodology and empirical research to tackle challenges
To address these challenges, we need rigorous methods and empirical research. Decision-making is complex, and intuition alone can be misleading. We must rely on careful economic modeling grounded in philosophical principles, combined with empirical data. This includes using theoretical models, running experiments, and analyzing statistical data to understand how people make decisions.
For the second challenge – experts and policymakers making mistakes themselves – we need further research into where their intuitions might be misguided. For example, a study we are currently designing will test how far policymakers’ beliefs about vaccination incentives deviate from their actual effects. Unlike typical behavioral economics, many such questions involve philosophical challenges such as value judgments or intuitive but slippery ideas like voluntariness that need to be dealt with carefully.
Creative approaches and empirical studies to encourage change
The third challenge – motivating people to engage with important but often avoided issues – requires creative ideas and a deep understanding of the psychology of human decision-making. We can’t simply assume people will respond to traditional incentives. Instead, we need to explore innovative approaches, perhaps experimental ones, to find effective ways to encourage individuals to make decisions they’re currently avoiding. The goal is not just to change behavior in general, but to specifically reach those who are the least motivated or aware of the need for change.
The importance of data and theory integration
These questions remain unresolved because they are inherently complex. To truly understand human decision-making, we need both robust data and sound theoretical frameworks that mutually inform each other. It’s a dynamic process that constantly evolves as we discover new ways to understand and improve decision-making.
Curiosity and societal impact
What drives my research is a deep curiosity about how people make decisions and about how we can understand these processes through rigorous science. This fascination with decision-making is not just intellectual; it is rooted in real-world issues. Take the example of the Covid pandemic, where social factors such as misinformation hindered effective management. Understanding how to better manage these issues in the future – whether through better policy design or public engagement – drives much of my work.
The role of the UBS Center in advancing behavioral economics
The UBS Center has been pivotal for the establishment of Zurich as a leading hub for behavioral economics in Europe. Its support has helped the Department of Economics attract top talent and become competitive with the best institutions worldwide. The Zurich Work-shop in Economics and Psychology is an essential event that brings together the brightest minds in behavioral economics, facilitating collaboration and knowledge exchange.
The center has not only contributed to our department’s academic success but also played a crucial role in fostering a public dialogue about behavioral economics. By bringing prominent economists to Zurich and keeping the public informed on the latest developments, the UBS Center ensures that our research has practical relevance and contributes to understanding critical societal issues.
The evolution of behavioral economics: from 2.0 to 3.0
Since the founding of the UBS Center in 2012, behavioral economics has evolved significantly. Early behavioral economics (1.0) focused on documenting deviations from standard economic models. Behavioral economics 2.0, which is still a very active area of research, moved towards building better models of human decision- making, incorporating insights from game theory and neuroscience. Now, with the rise of behavioral economics 3.0, we are applying these models to real-world problems, such as public policy and welfare economics.
How can behavioral economics solve real-world challenges in decision-making, from health and wealth to societal policies? With the rise of Behavioral Economics 3.0, UBS Foundation Professor Sandro Ambühl addresses complex questions on how to improve choices, evaluate policies, and engage individuals on critical issues like retirement savings. Through a blend of theory and empirical research, his work aims to shape better, evidence-based decisions.
Pressing challenges to address
- How can we assess if decisions are good or bad?
- How to ensure attempts to help don’t unintentionally harm?
- How to engage those most resistant to change?
Improving decisions in health, wealth, and happiness
The main goal of my research is to help people make better decisions about key aspects of life, like health, wealth, and happiness, as famously discussed in Nudge by Thaler and Sunstein. However, we face three fundamental challenges in this field. The first challenge is determining whether a decision is truly good or bad. We cannot directly know how someone feels about a choice, and outcomes are often unpredictable – good decisions don’t always lead to good results, and bad decisions sometimes yield surprisingly positive outcomes.
The second challenge is the concern that even well-intended experts and policymakers aiming to help people make mistakes themselves. If people are prone to poor decisions, how can we ensure that those in charge are not similarly flawed? This is a central critique of behavioral public policy: while it’s aimed at improving outcomes, there is always the risk of experts and policymakers misjudging what’s best for people.
Sandro Ambühl is UBS Foundation Assistant Professor for Behavioral Economics of Financial Markets at the UZH Department of Economics at the University of Zurich
Quote
Behavioral economics can help policymakers make better decisions, but only if we understand the biases at play.
Economic challenges of our time
From rising inequality and global trade tensions to climate change and the impact of artificial intelligence on labor markets – economists today are grappling with fundamental questions that will shape our collective future. In this special edition of the Public Paper series, all affiliated professors of the UBS Center share their perspectives on these challenges. Their contributions highlight how cutting-edge research conducted at the Department of Economics at the University of Zurich can help us better understand – and potentially solve – some of the most urgent issues of our time.
It is precisely this ambition that defines the UBS Center for Economics in Society. Since its founding, the Center has served as a platform for dialogue between academia, business, and policymakers and as a catalyst for excellence in economic research. That vision goes back to Kaspar Villiger. As the founding Chairman of the Foundation Council, he played a pivotal role in establishing and shaping the UBS Center.
With this fifteenth edition of the Public Paper series, we honor Kaspar Villiger’s extraordinary contributions and legacy. By strengthening research capacity at the University of Zurich and fostering public dialogue around key societal questions, his vision continues to inspire the Center’s mission: bridging knowledge and society to build a better future.
From rising inequality and global trade tensions to climate change and the impact of artificial intelligence on labor markets – economists today are grappling with fundamental questions that will shape our collective future. In this special edition of the Public Paper series, all affiliated professors of the UBS Center share their perspectives on these challenges. Their contributions highlight how cutting-edge research conducted at the Department of Economics at the University of Zurich can help us better understand – and potentially solve – some of the most urgent issues of our time.
It is precisely this ambition that defines the UBS Center for Economics in Society. Since its founding, the Center has served as a platform for dialogue between academia, business, and policymakers and as a catalyst for excellence in economic research. That vision goes back to Kaspar Villiger. As the founding Chairman of the Foundation Council, he played a pivotal role in establishing and shaping the UBS Center.
Sandro Ambühl on Google Scholarbrowse
Author
UBS Foundation Assistant Professor for Behavioral Economics of Financial Markets
Sandro Ambühl obtained his PhD in economics from Stanford University in 2016. He joins the UBS Center from his previous position as Assistant Professor of Economics at the Department of Management, UTSC, and the Rotman School of Business, University of Toronto. One focus of Sandro's research studies how to help people make good financial decisions. A second strand of research concerns policies for the exchange of goods about which people have ethical intuitions, as is the case, for example, with incentives for vaccine uptake or clinical trial participation. He addresses these questions using a combination of controlled experiments and economic theory. In 2017 he was awarded the Alfred P. Sloan Foundation grant “Using Behavioral Welfare Economics to Improve Financial Decision Making”. In 2022, his article "What Motivates Paternalism? An Experimental Study" (with B. Douglas Bernheim and Axel Ockenfels) was awarded the Exeter Prize for the best paper published in the previous calendar year in a peer-reviewed journal in the fields of Experimental Economics, Decision Theory and Behavioural Economics.
UBS Foundation Assistant Professor for Behavioral Economics of Financial Markets
Sandro Ambühl obtained his PhD in economics from Stanford University in 2016. He joins the UBS Center from his previous position as Assistant Professor of Economics at the Department of Management, UTSC, and the Rotman School of Business, University of Toronto. One focus of Sandro's research studies how to help people make good financial decisions. A second strand of research concerns policies for the exchange of goods about which people have ethical intuitions, as is the case, for example, with incentives for vaccine uptake or clinical trial participation. He addresses these questions using a combination of controlled experiments and economic theory. In 2017 he was awarded the Alfred P. Sloan Foundation grant “Using Behavioral Welfare Economics to Improve Financial Decision Making”. In 2022, his article "What Motivates Paternalism? An Experimental Study" (with B. Douglas Bernheim and Axel Ockenfels) was awarded the Exeter Prize for the best paper published in the previous calendar year in a peer-reviewed journal in the fields of Experimental Economics, Decision Theory and Behavioural Economics.