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Behavioural Economics:
Some lessons and policy implications
Ren van Bavel
IPTS Behavioural Economics Seminar Series
Session 3
Seville, 26 May 2011
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Behavioural Economics: Some lessons and policy implications
Part I: Behavioural economics
What is it?
On the terminology
Whats the policy relevance?
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Behavioural Economics: Some lessons and policy implications
What is it?
Economics Psychology
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Behavioural Economics: Some lessons and policy implications
On the terminology
Why behavioural
economics and not
behavioural sciences (orsimply psychology)?
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Behavioural Economics: Some lessons and policy implications
Whats the policy relevance?
Can influence people's behaviour
Can help understand how citizens makedecisions in complex environments
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Behavioural Economics: Some lessons and policy implications
Applying it to policy
Economics A Psychology
we are
here
B C
Policy
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Behavioural Economics: Some lessons and policy implications
Part II: Some lessons
1. We consistently make estimation errors
Loss aversion
Anchoring
Mental accounts
Overestimation of small probabilities
Over-preference for immediacy
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Behavioural Economics: Some lessons and policy implications
more lessons
2. We have limited ability and energy
3. Emotions shape our actions
4. We are bound to a social context
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Behavioural Economics: Some lessons and policy implications
Part III: Policy implications
1. More and better
information is not
enough to change
behaviour Example: calories
on the menu in
NYC restaurants
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Behavioural Economics: Some lessons and policy implications
Part III: Policy implications
2. We can nudge people into behaving acertain way
Choice architecture: designing the environment
in which a decision takes place
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Behavioural Economics: Some lessons and policy implications
Some examples of choice architecture
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Behavioural Economics: Some lessons and policy implications
Nudging as a policy tool
When to nudge?
In situations where people have the greatest
difficulty making the right decision
How to nudge? Keeping the principles of good choice architecture
in mind (there are 6)
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Behavioural Economics: Some lessons and policy implications
What makes for good choice architecture?
iNcentivesUnderstand mappings
DefaultsGive feedback
Expect error
Structure complex choices
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Behavioural Economics: Some lessons and policy implications
Some examples of policy nudges
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Behavioural Economics: Some lessons and policy implications
more policy implications
3. Policy impact assessment
If peoples response to a policy affects itseffectiveness, then there is a role for behavioural
economics
Example: Retail Investment Services study
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Behavioural Economics: Some lessons and policy implications
more policy implications
4. Getting value for money in policy interventions
Example: Ensuring consumers choose a browser
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more policy implications
5. Preventing abuse by industry
Either through regulation or by nudging
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Behavioural Economics: Some lessons and policy implications
An invitation to reflection
How can behavioural
economics help solve
problems in yourpolicy area?
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Behavioural Economics: Some lessons and policy implications
References
Influence: The psychology of persuasion, by RobertCialdini.
MINDSPACE, by the Institute for Government and
the UK Cabinet Office.
Nudge: Improving decisions about health, wealth
and happiness, by Thaler and Sunstein.