Behavioural Economics and Public Policy Applications

Overview

How should governments persuade their citizens to save more for retirement, consume less water and electricity, pay their taxes on time, comply with public health rules, lead healthier lifestyles, and drive less? Instead of coercive measures and the use of financial incentives and penalties, can governments shape people’s behaviours without reducing choice and liberty? In recent years, insights from behavioural economics have begun to influence policy in many domains, including health and retirement, consumer finance, energy and the environment, tax and social security, public and private transport, and many other areas where governments hope to change or shape people’s behaviours. Instead of assuming that our citizens are the rational, interest-maximising agents we find in economics textbooks, a more realistic assumption is that people’s behaviours are affected by various biases and cognitive complications. A growing body of research shows numerous ways in which individuals act in ways that run counter to the predictions of standards economics. By examining people’s preferences, beliefs and decision processes through the lens of psychology, this course highlights important implications for the way government design, implement and communicate policies.

Objectives

• Introduce participants to key ideas in behavioural insights and how they have been applied to public policies and programmes. 
• Examine how applying behavioural insights to public policies and programmes can increase compliance or citizen participation.
• Explore how public policies can be designed, implemented and communicated by harnessing behavioural insights.

Structure

The workshop was organised in four half-day sessions.

• Session I: How are people’s preferences and beliefs shaped by psychology?
• Session II: How are people’s decision processes shaped by psychology?
• Session III: Nudges in public policy
• Session IV: Short lecture on decision biases in government. Groups to work on areas where they can apply behavioural insights and suggest ways of improving compliance or participation.