[Open Forum] Kakao Compensation “Talk Drawer” Becomes a Case of Behavioral Economics Misuse

Richard Thaler, a master of behavioral economics and a Nobel laureate in economics, once said, “When we acknowledge that seemingly unimportant things can matter and that people can make mistakes, we can make better decisions.” Behavioral economics assumes the existence of homo economicus—an economic man with unbounded rationality.

But what is reality actually like? Out of nowhere, there are wingless angels who leave behind envelopes of cash and disappear, good Samaritans who stop in the middle of their busy day to help rescue others, and volunteers who give up precious holidays to deliver briquettes. We constantly witness various kinds of non-economic human beings all around us. Perhaps the reason Thaler won the Nobel Prize in economics for behavioral economics was that he brought economics closer to the way real human beings actually are. Through behavioral economics, we have come to understand systematically many irrational human behaviors that traditional economics cannot explain. At the same time, however, we also see cases where this is abused to encourage people’s irrational behavior and then dressed up as a “nudge.” A nudge means “a gentle intervention that induces another person’s behavior.” Literally translated, it means “to give someone a slight poke with the elbow.”

Yonsei University, where I am affiliated, has since March 2013 separated optional fees from tuition and notified students of them separately, allowing individuals to choose whether to pay them, in accordance with the Ministry of Education’s recommendation on the selective payment system for optional fees. As a result, the student activity fee, which had once been paid almost as a matter of course, came to be left entirely up to each student’s choice. In the first year of the selective payment system, the payment rate for the first-semester student activity fee, set at 10,000 won, was 40 percent, and by the second semester it had fallen to 28 percent. In other words, the financial resources previously supplied to the student council were cut to a quarter of what they had been.

As the situation grew serious, some student representatives began advocating an opt-out system for optional fees. Put simply, they wanted the student activity fee checkbox to be checked by default so that payment would be made automatically unless students intentionally unchecked it. They were likely aiming to exploit the default effect. But I was skeptical. Although I did not know behavioral economics at the time, it felt to me like a stopgap measure—a superficial fix that dodged the real issue rather than addressing it at its root. As evidence, I explained the significance of the 12 percentage-point gap between the first and second semester payment rates in the first year of the selective payment system. Looking at recent data, I see that the student activity fee payment rate now does not even reach 20 percent. The problem is that this situation still remains at a standstill, with no sign of improvement. The solution, I believe, lies not in nudges but in enhancing political efficacy within student society.

Behavioral economics becomes far more valuable when it is properly learned, correctly understood, and appropriately used. Misusing or abusing it leads to setbacks more often than one might think. Kakao’s recent case is one example. As an apology for last year’s KakaoTalk service outage, Kakao provided emoticons to the entire nation, but the additional subscription pass for Tok Storage Plus drew suspicious looks, with some asking whether it was designed to exploit a kind of inertia. That is because once the free trial period ended, it was set up to convert automatically into a paid service. Of course, I would like to believe in their good intentions, but the suspicions of those who questioned it are reasonable as well. After all, even without formally studying behavioral economics, everyone is a human being who has acquired a behavioral-economic way of thinking.

Hanmin Koo, Visiting Research Fellow, Center for Free Enterprise (CFE)

Original title: [자유발언대] 행동경제학 오남용 사례 된 카카오 보상 '톡서랍'

Author: Han-min Koo

Date: 2023-04-21

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25553