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Behavioural Economics and Policy making,Learning from the Early Adopters

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  • PETER D.LUNN

    (Economic and Social Research Institute, Dublin. Trinity College, Dublin)

Abstract

This paper critically examines initial applications of Behavioural Economics (BE) to policymaking. It focuses primarily but not exclusively on what can be learnt from the early adopters of policies inspired by BE, notably America and Britain. BE is defined by its inductive scientific approach to economics, which can produce empirical demonstrations that are persuasive to policymakers facing practical problems. The analysis identifies three routes via which BE has influenced policy: (1) the theory of libertarian paternalism (“nudges”), (2) the provision of toolkits for policymakers seeking behavioural change, and (3) the expansion of the skill-set of applied economists (and scientists in related disciplines). The effectiveness of each route is assessed, in terms of the likelihood of successfully integrating scientific advances with policy development. The analysis concludes that (3) is the only route that can adapt to the ongoing and rapid evolution of what is a young science. Successful policy development is more likely where there is expert input and the capacity to engage in applied experimentation, piloting and evaluation. The implication is that countries, including Ireland, are more likely to reap the benefits of BE if they create an active and effective interface between applied economists and policymakers.

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File URL: http://www.esr.ie/vol43_3/05%20ESRI%2043-3%20Lunn%20(PP).pdf
File Function: First version,2012
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 43 (2012)
Issue (Month): 3 ()
Pages: 423-449

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Handle: RePEc:eso:journl:v:43:y:2012:i:3:p:423-449

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  1. Chris Wilson & Catherine Waddams Price, 2007. "Do Consumers Switch to the Best Supplier?," Working Papers 07-6, Centre for Competition Policy, University of East Anglia.
  2. B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc.
  3. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-77, September.
  4. Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
  5. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-72, June.
  6. Lunn, Pete, 2012. "Can Policy Improve Our Financial Decision-Making?," Papers EC8, Economic and Social Research Institute (ESRI).
  7. Huck, Steffen & Zhou, Jidong, 2011. "Consumer behavioural biases in competition: A survey," MPRA Paper 31794, University Library of Munich, Germany.
  8. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
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Cited by:
  1. Lunn, Pete, 2013. "Are Consumer Decision-Making Phenomena a Fourth Market Failure?," Papers WP455, Economic and Social Research Institute (ESRI).

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