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Behavioural Economics and Policymaking: Learning from the Early Adopters

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  • Lunn, Pete

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 results in 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 route (3) is the only one that can adapt to the ongoing and rapid evolution of what is a young science. Successful policy applications are most likely where there is expert input to policy development and the capacity to engage in applied experimentation and piloting of policy ideas. The implication is that countries, including Ireland, are more likely to reap the benefits of BE if they create an effective interface between applied economists and policymakers.

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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP425.

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Date of creation: Feb 2012
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Handle: RePEc:esr:wpaper:wp425

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Keywords: Policy/policy development/Ireland;

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References

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  1. 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.
  2. Huck, Steffen & Zhou, Jidong, 2011. "Consumer behavioural biases in competition: A survey," MPRA Paper 31794, University Library of Munich, Germany.
  3. 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.
  4. Stefano DellaVigna, 2007. "Psychology and Economics: Evidence from the Field," NBER Working Papers 13420, National Bureau of Economic Research, Inc.
  5. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  6. Chris M. Wilson & Catherine Waddams Price, 2010. "Do consumers switch to the best supplier?," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 647-668, October.
  7. Looney, Adam & Kroft, Kory & Chetty, Raj, 2009. "Salience and Taxation: Theory and Evidence," Scholarly Articles 9748525, Harvard University Department of Economics.
  8. Lunn, Pete, 2012. "Can Policy Improve Our Financial Decision-Making?," Papers EC8, Economic and Social Research Institute (ESRI).
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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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