Chetty on Behavioural Economics and Policy

From the recent AEA conference, Raj Chetty’s lecture on behavioural economics and public policy is one of the most useful summaries to date (summary here).

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  1. The lecture is interesting, although unfortunately you have to watch it, as the paper is not online and the slides, which are, are not always clear on their own.

    Chetty’s claims for behavioural economics are not particularly strident — a source of insights, and perhaps a useful guide to thinking before modelling.

    Even so, there is perhaps some overreach. The finding that the children of families moving from poor to less-poor neighbourhoods prosper relately in later life, and that a “nudge” might promote such movement, is all very well in itself. But it says little about the aggregate scope for such movement (congestion in less-poor neighbourhoods?) or about the impact on the population remaining behind in poor neighbourhoods. Both issues should inform public policy. These issues arose in discussion of tenant purchase schemes in local authority housing in Dubln in the past, where the practice of purchasing from the LA, then selliling and moving out, was seen as denuding some areas of some of their strongest, most capable and most active citizens.

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