Behavioral economist Ernst Fehr: Revolution of the economy through experiments!

Behavioral economist Ernst Fehr: Revolution of the economy through experiments!

Ernst Fehr, a leading behavioral economist and professor at the University of Zurich, gave a keynote speech at the Austrian Academy of Sciences (ÖAW) in Vienna on May 16, 2025. Under the title “The empirical and behavioral science revolution in economics,” Fehr discussed the fundamental changes within the discipline that were brought about by empirical research and experiments. In his address, Fehr noted that the last 50 years have been characterized by a revolutionary development made possible by powerful computers and modern empirical methods. These advances allow researchers to precisely test and understand causal relationships.

Fehr, who was born on June 21, 1956 in Hard, has earned a reputation as one of the most important research personalities in the field of behavioral economics. Among other things, he deals with the complexity of products and their influence on consumer decisions. An illustrative example from his talk was a US hotel where guests had to pay extra to make their beds. This practice not only increases complexity but also costs for customers, which can be interpreted as a strategic move by companies to increase “search costs”.

Entrepreneurial strategies and experiments

In his speech, Fehr criticized the tactics of some companies that deliberately increase search costs for customers in order to make it more difficult to switch to other providers. He also pointed out that companies like Google and Amazon conduct experiments every day to influence customer behavior. This raises questions about the ethical implications of such strategies.

His work also extends to the study of individual preferences, social norms and group cultures. Fehr also analyzes the causal effects of trust and social norms on economic behavior. One of his recent studies examined whether business cultures encourage excessive risk-taking, which contributed to the 2008 financial crisis.

The role of trust and institutions

In his research, Fehr shows that individuals tend to be more risk-averse during boom times, which reinforces economic highlights. In contrast, they become more cautious in times of crisis, which leads to a fall in the price of financial assets. He noted that trust or institutional rules alone are not enough to ensure efficient economic interactions. Rather, both trust and robust institutional structures are necessary.

Fehr is also co-founder of “FehrAdvice”, where he makes empirical knowledge accessible to companies. However, he warns that science often emphasizes faith rather than empirical evidence. This is a dangerous trend that must be combated. Given his successes and insights, Fehr is not thinking about a possible Nobel Prize and wants to distance himself from the expectations of the outside world.

The importance of Fehr's work is evident not only in his many awards, but also in his active role within the academic community, publishing in renowned journals such as the American Economic Review and the Journal of Political Economy. His findings contribute significantly to the further development of economics and our understanding of human behavior in economic contexts.