Behavioural Economics and Public Policy

I have posted a few times on the implications of the emerging literature on behavioural economics and public policy for Irish policy. Some readings from a previous post are available here and three others posts with links are available here. For those interested in this area, the following links may be of interest:

(i) Cass Sunstein, who is one of the main figures in this area, recently released a new book called “Simpler: The Future of Government“. It outlines an approach to government that emphasises making regulations, laws and taxes less confusing and more robust. It is partly based on academic work and partly on his time as a senior regulator in the Obama administration. It follows on from some of the ideas in the work Nudge that he co-authored with Richard Thaler. I recommend this book to anyone involved in designing regulation, taxation and policy. It is short and written clearly by someone with experience both as a high-profile academic and a senior policy-maker.

(ii) The US have now set up a version of the UK Behavioural Insights team. Details of that are here.

(iii) One of the researchers in our group has put together a data-base of studies employing what can loosely be called “Nudges” in various areas of policy. He has currently summarised 80 studies and adds to them every week or so. There are some very interesting examples across many areas of policy.

(iv) It is in the list in one of the previous links but the book I most recommend for a wide overview on behavioural science perspectives on policy is Shafir’s “Behavioural Foundations of Public Policy“. A bit heavy (in both senses of the word) if you are looking for beach-reading but I can’t recommend it more highly to people wanting a grounding in this area.

(v) I have also put together a fairly detailed reading list on behavioural economics and public policy, including legal and ethical issues.

(vi) Apologies for blatant plug but we have started our own graduate programme in this area. Queries welcome.

(vii) Added from the comments, Kevin Denny has a list of behavioural economics resources

Finally, would be interested in people’s thoughts on this agenda in the area of Irish public policy. Are there areas where changing of default options could bring defined improvements in public services? Are there environmental changes in areas like taxation, education, health, waste management that could be enacted to improve outcomes in these areas? What areas of public policy would most benefit from reducing complexity of rules and regulations? And on the other hand, are these types of policies a distraction from real macroeconomic and social issues? How much should economics education take on board new models emerging from behavioural economics?

Comments

comments

23 thoughts on “Behavioural Economics and Public Policy”

  1. From conversations I have had with civil servants here, there is an active interest amongst policy makers in Behavioural Economics. For example the Revenue Commissioners have done some interesting experiments on tax compliance (see link below).
    I have also put together a set of resources including various links, papers, videos and so on:
    http://kevindenny.wordpress.com/behavioural-economics/

    http://taxpolicy.gov.ie/wp-content/uploads/2013/06/TaxEconomicsconference_June2013_KWalsh_web.ppsx

  2. Once the effects of migration have been felt, the word “Irish” may no longer apply, as majority identity will be “European”.

    Those who fail to understand history …… Is it accurate to say that Population in Ireland, including Africans and Europeans and Irish is still less than in the 15th Century?

  3. @ liam
    Any thoughts on the efficacy of the UK’s nudge unit in downing st?
    I have to say I don’t have much time for Sunstein. Read a very good article a while ago about him and Samantha Power but don’t have the link to hand. The crisis in the US needs more than nudges IMO. Capital is the problem.

  4. I guess that what concerns me about this sort of thing is the certainty that it will be applied in support of policies that are not as positive as those in the database. Another mechanism for soft social control in a world in which social control is already reverting to being far too pervasive.

    Even the idea that promoting greater enrollment in pension schemes is desirable should be questionned in the context that they are no longer an unambiguously cost effective way to save for retirement, and that they are a very tempting a target for plunder by a financially stressed government.

  5. Occupational licensing has been a growing racket at US state level in recent decades with almost 30% of the workforce now in firms that require a license up from 5% in the 1950’s. Adding people who are preparing to obtain a license or whose jobs involve some form of certification and the share is 38%.

    The Economist reported in May 2011 that Florida’s legislature debated a bill to remove licensing requirements from 20 occupations, including hair-braiding, interior design and teaching ballroom-dancing. For a while it looked as if the bill would sail through: Florida has been a centre of tea-party agitation and both chambers have Republican majorities. But the people who care most about this issue – – the cartels of incumbents that contribute to political campaigns – – lobbied the loudest.

    One predicted that unlicensed designers would use fabrics that might spread disease and cause 88,000 deaths a year. Another suggested, even more alarmingly, that clashing colour schemes might adversely affect “salivation”. In the early hours of May 7th the bill was defeated.

  6. The UCD Law School is in the early stages of organising a Spring 2015 conference devoted to Law & Regulation, at which, it is hoped, Cass Sunstein, will speak.

  7. INSEAD has published a paper on victim syndrome, which may help those who have a propensity to by default see commentary on public services as nefarious:

    http://www.insead.edu/facultyresearch/research/doc.cfm?did=50114

    Charles Haughey had introduced me to that term ‘nefarious’ some time back in UCC, when I had questioned some of his motives.

    On the Irish public services, the Institute of Public Administration has in recent times published an assessment on the implementation of change or not in the Irish public service.

    The Internet has provided a significant improvement in services for the public.

    However, many countries have had problems with big public sector IT projects, which have reflected problems in both the public sector and the private sector consultancy firms who have huge earnings potential from them.

    The UK NHS launched an £11.4bn IT programme in 2002 and by 2011, £6.4bn had been spent on it and midway, Accenture, the US consultancy firm, withdrew from it and refunded part of its income, because of implementation failures.

    The House of Commons Pubic Accounts Committee said in 2011 on the plan to develop an electronic patient record system:

    This intention has proved beyond the capacity of the Department to deliver and the Department is no longer delivering a universal system. Implementation of alternative up- to-date IT systems has fallen significantly behind schedule and costs have escalated. The Department could have avoided some of the pitfalls and waste if they had consulted at the start of the process with health professionals. The Department has failed to demonstrate the benefits achieved for the £2.7bn spent to date on care records systems.

  8. The introduction of water charges will surely be an opportunity for behavioural economics. For now the default assumption is that when you turn on the tap, it’s “free.” Clearly moving to charges is a hot potato but the it’s rare there’s an opportunity to move from no pricing scheme at all to different types of scheme.

    Another behavioural nudge would be to have a policy of ministers and senior civil servants not driving past ATMs on their way to important banking policy meetings.

  9. WTF does Mr Finfacts’ citation of some pop-psychological nonsense about “victim syndrome” have to do with:

    1) whatever he’s trying to say about the public sector in Ireland;
    2) the topic of this blog post?

    The correct answers are “nothing” and “nothing.”

    My question for him is: how much or how little is your credibility worth to you? Because, frankly, you’re exposing yourself here.

  10. Ta for links.

    a few minor points:

    I would like to ban the use of lawnmowers and other noisy mechanicals before noon on Sunday mornings.

    Methinks the Dail bar should observe normal hours!

    Introduction of gender quotas should improve political representation.

    Roadside dumping and littering to be made a criminal offence.

    Economists to receive a ‘real’ education!

    Ernie Ball and DOCM to receive Emeritus Professorships at zero pay on conditon of vows of trappist silence!

    Tull to run for SF in Kingstown for the next Dail.

    Blind Biddy to be next President of Ireland.

    Irish Cricket to win the 2015 World Cup.

    All behavioural positives …

  11. It outlines an approach to government that emphasises making regulations, laws and taxes less confusing and more robust.

    Regulations become complex because of the efforts of lobbyists (i.e. it’s a feature, not a bug).

    @ Ernie Ball. I don’t know. I’m still laughing at his assumption that the teabaggers are a source of good government (or for that matter, the implication that they’re free of his charmingly-named “victim culture”).

  12. @Michael Hennigan IT systems are problematic in a public sector because they require structured thinking and clarity of thought, while public services are run on behalf of politicans who abhor these concepts. IT systems make clear that which was previously unstated, and that wouldn’t do.

    The structure of recent pay cuts, which were designed not to affect most clerks, but to catch those with additional skills, will hardly help.

  13. The UK government in recent years has made significant progress in changing its IT and digital strategies while opening up public procurement to public transparency.

    A value ceiling has been put on individual IT projects while a small number of big firms will no longer have the pick of such work to the exclusion of smaller companies.

    About 820 government-funded websites and 2,000 domians are being replaced by one portal that won the Design of the Year award from the Museum of Design last April.

    Mike Bracken, executive director of the Government Digital Service, said Gov.uk reflected a new approach to IT projects, at a time of limited public funding while drawing on the startup culture.

    He told the FT: “We brought a whole generation of people to the centre of government. Previously those skillsets weren’t recognised in government – we outsourced them. We haven’t got the money, nor is it reasonable to start pouring big amounts of money into IT projects with massive multi-year contracts. We have done this in an agile way using largely open-source technologies because that is the cheapest way to do it.”

    Deyan Sudjic, director of the Design Museum, said the Cabinet Office team deserved the award for designing something that a grandmother could use.

    The Open Government Partnership formally launched on September 20, 2011, when the 8 founding governments (Brazil, Indonesia, Mexico, Norway, Philippines, South Africa, United Kingdom, United States) endorsed an Open Government Declaration, and announced their country action plans.

    The OGP aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance. To become a member of OGP, participating countries must embrace a high-level Open Government Declaration, deliver a country action plan developed with public consultation; and commit to independent reporting on their progress going forward through the OGP Independent Reporting Mechanism (IRM).

    The Irish Government submitted a letter of intent, dated May 15, 2013, to participate in OGP.

    Minister Brendan Howlin wrote:

    “As you are aware, Ireland has a long history of involvement in initiatives that seek to encourage transparency and open government.”

    The recipients of course were not aware but the reality may sometime catch up with the fantasy.

    http://www.opengovpartnership.org/countries/ireland

    UK government departments and agencies publish details of spend over £500 from 1 April 2011.

    Have a look at the NAMA procurement section. Contract winners are listed but of course no values are listed – something called ‘commercial sensitivity’ and wonder why big firms seldom compete on price?

  14. @ EWI

    I’m still laughing at his assumption that the teabaggers are a source of good government..

    You got the Economist’s reference to the Tea Party arseways.

    It was 6 months after Marc Rubio, the Tea Party’s candidate, beat the incumbent Republican governor in a Florida contest for a US Senate seat.

    The Economist was referring to people in the legislature who were elected on a platform of opposition to big government, voting for it.

    By your logic, citing last week’s Tea Party support for a farm bill, full of goodies for big farmers and corporations, while excluding food stamps, implies admiration for the Tea Party.

    Extremists on both ends of the spectrum see the world through the same prism technology.

  15. @Ernie

    MH is pretty much the best contributor to this site because (i) he knows a lot (ii) he ends up being right most of the time.

    Re nudge:

    As with so much social science, the policy makers run with the technique before society has had a chance to deliberate on the moral implications. Excellent paper from Luc Bovens of LSE on this:

    http://www.bovens.org/TheEthicsFV.pdf

    Key paragraph (for me):

    “… the less control we retain over being
    Nudged, the more problematic it is. If we choose
    to put ourselves into a situation that is rich with
    Nudges, then we have little to complain about. But
    does this type of consent extend to a democratic mandate to the government to be Nudged? I have argued that
    Nudges must be transparent in principle at the level of each token
    Nudge, in order to ensure that everyone can unmask the manipulation if
    they wish to do so. This protects the rights of the
    minorities who do not wish to be so manipulated and
    it keeps a check on the government.”

  16. The behavioral nudges listed seem to be all pretty nice but minor tweaks in communications style or effectiveness, not significant taxation or policy moves.

    Isn’t the most important behavioural aspect of tax policy simply the elasticity of the taxed behaviour? Government aims to maximize revenue and so primarily taxes those things where behaviour will not change or where tax can’t be avoided. E.g. tax working more than capital. Tax smoking more than sweets. Tax owning a car more than driving a car..even while simultaneously claiming the tax is about CO2.

    Meantime, if people do respond to behavioural nudges – and cars is a good example where people responded by buying lower CO2 cars – the govt will simply change the tax again.

    What we actually need is a behavioural economics that nudges government to want less cash over time.

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