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The Tale of Positive Psychology and Behavioral Economics

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Apr 16, 2017

With the recent rise and popularisation of behavioral economics, there has been a proliferation of research on the applications of psychological principles in influencing decision making. The primary tools used by behavioral economists are nudges, which are methods of influencing behavior by employing the very biases and barriers that prevent us from carrying out a desirable behavior.

While social psychology and cognitive neuroscience have shared the limelight with behavioral economics in designing nudges, there has been little mention of the connection with positive psychology, and its contributions to the field. This article seeks to make salient the impact of positive psychology on behavioral economics for practitioners and students alike. We will do this by examining existing research and constructs from both fields, with relevance to education, healthcare, and everyday optimal living.

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The Zeitgeist of Contemporary Psychology

Around the same time as behavioral economics was gaining ground within scientific circles, psychology witnessed the emergence of a new subfield — positive psychology. Pioneers Seligman and Csikszentmihalyi (2000) defined positive psychology as “the scientific study of positive human functioning and flourishing on multiple levels that include the biological, personal, relational, institutional, cultural, and global dimensions of life.” Early detractors criticised the field’s presumed sole focus on the positive side of the spectrum of emotions and behavior, which positive psychologists disproved by studying concepts such as grief, conflict, and grit, and incorporating them into theories of learned helplessness, resilience, and flow.

The last decade has seen several ideas derived from positive psychology frameworks applied to behavioral economics experiments. Alex Linley, a prominent positive psychologist, partially credited positive psychology with influencing the shift towards behavioral economics (Jarden, 2012). He also emphasised the opportunities for mutual learning and collaboration that exist between the two. This is particularly relevant in areas of education, health, charity, and habit formation, where we can observe real world economic impacts.

How Positive Psychology Contributes to Learning

The Behavioral Insights Team, UK, has run a number of studies examining the effectiveness of different interventions in advancing student success. Personal engagement, flow, grit, and social support are fostered through some of these intervention designs.

In a study that sought to improve student achievement, the team devised exercises to cultivate grit: the passion and persistence to attain a long term goal (Duckworth, Peterson, Matthews, & Kelly, 2007). This involved deep practice and skills to overcome frustration [1]. Deep practice is one of the steps necessary for achieving Flow, a state in which we are intensely involved in a task, which in itself becomes a reward. Students who received the training exhibited an almost 10% boost in attendance relative to those who did not receive the intervention, suggesting that they might have been more motivated to learn.

In a current ongoing study, aptly named Project College Success (Groot & Sanders, 2017), students can nominate a study supporter, who will receive scheduled text messages with conversational prompts about school work. These prompts guide the development of a supportive relationship dynamic. Positive relationships, an element of Seligman’s (2011) PERMA Model (which outlines five pillars of well-being), can be understood as reciprocal, supportive relationships, which reduce stress (Cohen, 2004), and promote development and achievement (Marcon, 1999), to name a few.

Behavioral Insights for Health Promotion

A fundamental roadblock to long term maintenance of healthy actions is present bias – the tendency to value present payoffs more than payoffs in the future. This, when combined with loss aversion (we pay more attention to what we will lose, than to what we will potentially gain), presents a formidable impediment, especially with health behaviors like exercising, weight loss, or smoking cessation, which are not particularly enjoyable at the outset. As we will see, positive psychology can play a role in bypassing these barriers to long-term health promotion.

Several programs have studied the efficacy of providing financial incentives to encourage health behaviors. While this is effective in initiating behavioral change, studies show that financial incentives may be engendering extrinsic motivation, but “crowding out” intrinsic motivation — so when the external goal (money) is removed, the individual no longer feels like continuing the behavior (Lewis & Black, 2015).

Any behavior tends to fizzle out when one is not intrinsically motivated to do it. But the move from extrinsic to intrinsic motivation can occur with the help of positive psychology. When Babcock & Hartman (2009) provided students with financial incentives for gym attendance, they noticed that those with friends who were also in the study tended to perform better than those who didn’t.

In another trial, financial incentives and peer mentorship were compared to usual care in the context of controlling blood glucose levels for diabetic veterans. Normal care included information about haemoglobin A1c (which indicates blood glucose levels) and ideal goal levels of HbA1c. The financial incentive arm involved participants receiving $100 for 1% reduction in blood glucose levels, and $200 for 2% reduction. In the peer mentorship program, participants were paired up with mentors from the same cultural background who had succeeded in bringing their diabetes under control. The strategic pairing of mentors & mentees encouraged comradeship and understanding, resulting in peer mentorship emerging as the most effective intervention. (Long, Jahnle, Richardson, Loewenstein, & Volpp, 2012). Peer support can help us not only stay on the track and be accountable, but it also cultivates optimism, trust, and a community feeling that we’re all in this together.

Habit Formation and Optimal Living

Targeted interventions aside, how can behavioral economics help us in everyday living? Enter Fabulous, an app that was incubated at the Center for Advanced Hindsight at Duke University, with the unique purpose of transforming your life through positive habit formation aided by insights from behavioral economics. Think of it as a gentle guide and an enthusiastic cheerleader rolled into one.

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The overarching theme of Fabulous is to harness the power of mindfulness (i.e., paying purposeful attention to the present in a non-judgmental way) to promote rituals involving healthy eating, exercise, productivity, and more. Each ritual begins with a self-made list of reasons why the behavior is important to us, followed by affirmations, and an option to pre-commit to the ritual [2]. When this method was tested for exercise, Fabulous users reported increased frequency of exercise, likelihood to continue exercising, and enjoyment in both the exercise and its preceding ritual. Fabulous is a truly fabulous (pun intended) union of positive psychology and behavioral economics, with the added plus of a beautiful design and UI (no surprise, it won the Google Play Award for Best Use of Material Design last year). Put together, it makes for a great user experience as you’re making your way towards positive living.

Key Takeaway

The aforementioned research illustrates how nudges designed with inputs from positive psychology make for positive, long term behavioral change. In contrast to nudges using merely financial gains or other extrinsic goals, those with elements of positive relationships, grit, mindfulness, and social support seem to show promise in sustaining desirable behavior. It is worth noting that while positive psychology has been used in behavioral nudges in the past, there are unplumbed depths in both disciplines, with lots left to learn and discover. In light of these realities, research with a focus on using positive psychology constructs to design better and more effective behavioral strategies appears to be an area ripe with future opportunities.

[1] “The Behavioural Insights Team’s Update Report: 2015-16”, 2016
[2] “Making Exercise Meaningful,” n.d. — In Center for Advanced Hindsight. Retrieved March 2017, from


Babcock, P., & Hartman, J. (2010). Exercising in herds: Treatment size and status specific peer effects in a randomized exercise intervention. Retrieved March 2017, from the University of California, Santa Barbara website,

Cohen, S. (2004). Social relationships and health. American Psychologist, 59(8), 676-684.

Duckworth, A. L., Peterson, C., Matthews, M. D., & Kelly, D. R. (2007). Grit: Perseverance and passion for long-term goals. Journal of Personality and Social Psychology, 92(6), 1087–1101.

Groot, B., & Sanders, M. (2017, March 24). Supportive text messaging to encourage student success [Blog Post]. Retrieved from encourage-student-success/

Jarden, A. (2012). Positive Psychologists on Positive Psychology: Alex Linley. International Journal of Wellbeing, 2(2), 83–87.

Lewis, K., & Black, J. (2015). Incentivizing health behaviors. In C. A. Roberto, & I. Kawachi, (Eds.), Behavioral Economics and Public Health, New York, NY: Oxford University Press.

Long, J. A., Jahnle, E. C., Richardson, D. M., Loewenstein, G., & Volpp, K. G. (2012). Peer mentoring and financial incentives to improve glucose control in African American veterans: a randomized trial. Annals of Internal Medicine, 156(6), 416-424.

Making exercise meaningful (n.d.). In Center for Advanced Hindsight. Retrieved March 2017, from

Marcon, Rebecca A. (1999). Positive relationships between parent school involvement and public school inner-city preschoolers’ development and academic performance. School Psychology Review, 28(3), 395-412.

Seligman, M. E. P. (2011). Flourish: A visionary new understanding of happiness and well-being. New York, NY: Published by Free Press.

Seligman, M. E. P., & Csikszentmihalyi, M. (2000). Positive Psychology: An introduction. American Psychologist, 55(1), 5–14.

The Behavioural Insights Team (2016). The Behavioural Insights Team’s update report: 2015-16. Retrieved from

About the Author

Fahima Mohideen

Fahima Mohideen

Pondicherry University

Fahima is a graduate student in Applied Psychology at Pondicherry University, India. Her research interests span the areas of group dynamics, moral decision making, and behavioural economics.

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