Behavioural Economics
“Human behaviour is under the influence of the passions”
Many new students of Economics find the burgeoning field of Behavioural Economics (B.E) very interesting. And it is. It is fun, accessible and interesting. However, it is often misrepresented as a series of experiments which, whilst fun, don’t necessarily reveal its true power. This page is hopefully going to offer those who are interested in this field directions where they can go and explore the more interesting but academically rigorous aspects of B.E.
These annual Behavioural Economics Guides are superb for illuminating both more advanced B.E concepts and also interesting application in a range of contexts. Each edition focuses on slightly different areas.
Behavioural Economics Guide 2020
Behavioural Economics Guide 2019
Behavioural Economics Guide 2018
Behavioural Economics Guide 2017
Behavioural Economics Guide 2016
Behavioural Economics Guide 2015
Behavioural Economics Guide 2014
Whilst B.E can be a fun subject to learn about, with its quirky experiments, the ultimate reward in the discipline is what it can bring to practical applications that harness the learnings from B.E and give tangible Pareto-improvements from a traditional approach, in improving market failures and outcomes. This following resource is useful in this regard. From personal loans, to drip pricing, to energy bills, there are some excellent lessons discussed in this document from the OECD:
Lessons From the World - B.E and Public Policy
The Behavioural Insights Team have produced a framework to help inform B.E policy responses to market failures. This framework is known as EAST. (Easy, Attractive, Simple, Timely). The paper’s aim is to show how some of the most relevant behavioural insights can be applied to policy challenges. Read more here.
The Behavioural Insights Team (UK) produces some excellent evidence-based reports and articles/blogs on real policies that have been evaluated for success. I would highly recommend you signing up to their mailing list but here are some particular highlights:
Behavioural insights to COVID-19 NHS text messages
https://www.bi.team/publications/increasing-vaccine-uptake-in-low-and-middle-income-countries/
https://www.bi.team/publications/evaluating-the-impact-of-sms-reminders-on-tax-compliance/
https://www.bi.team/publications/applying-behavioural-insights-to-labour-markets/
https://www.bi.team/publications/from-intentions-to-action-the-science-behind-giving-behaviours/
https://www.bi.team/publications/behavioural-government/
https://www.bi.team/publications/behavioural-science-and-the-sustainable-funding-of-charities/
Critique of Behavioural Economics
This section is for those curious minds who are curious about the limitations of behavioural economics both as a discipline and as a policy tool. There is an asterix* by those that I feel have more advanced discussion, whereas the remainder are more accessible.
Consumers are becoming wise to your nudge
Tim Harford on B.E
Tim Harford here in the FT writing a very accessible article on the limitations of B.E for policy application.
The challenges of behavioural insights for effective policy design
Colin R. Kuehnhanss has produced an excellent journal article here, the abstract of which is:
“Behavioural insights are becoming increasingly popular with policy practitioners. Findings and methods originally provided by cognitive psychology and later behavioural economics have found use in the formulation of public policies. Their most popularised application has emerged under the auspices of libertarian paternalism in the form of ‘nudging’. Its proponents claim to provide a new instrument to facilitate the formulation of effective and evidence-based policy, taking people’s actual behaviour into account from the outset, while preserving their liberty to choose. This article reviews the origins of libertarian paternalism and the behavioural insights it builds on and takes a critical look at the foundations nudging relies on as a policy tool. It also discusses the ongoing efforts to build policy capacity to integrate behavioural insights and experimental methods in the creation of public policy. Behavioural insights offer a powerful tool to reshape and design new evidence-based policy. However, designers ought to be aware of the underlying assumptions on individual behaviour, the broadness of the mandate the nudging approach claims and the challenges they pose for design effectiveness.”
Read the article here.
WEIRD science*
Well-worth a read for those who want to look at B.E with a critical lens. The Abstract summarises this article well:
“Behavioral scientists routinely publish broad claims about human psychology and behavior in the world’s top journals based on samples drawn entirely from Western, Educated, Industrialized, Rich, and Democratic (WEIRD) societies. Researchers – often implicitly – assume that either there is little variation across human populations, or that these “standard subjects” are as representative of the species as any other population. Are these assumptions justified? Here, our review of the comparative database from across the behavioral sciences suggests both that there is substantial variability in experimental results across populations and that WEIRD subjects are particularly unusual compared with the rest of the species – frequent outliers… The findings suggest that members of WEIRD societies, including young children, are among the least representative populations one could find for generalizing about humans…. Overall, these empirical patterns suggests that we need to be less cavalier in addressing questions of human nature on the basis of data drawn from this particularly thin, and rather unusual, slice of humanity. We close by proposing ways to structurally re-organize the behavioral sciences to best tackle these challenges.”
Read the whole article here.