Monday, October 14, 2013

Behavioural economic-informed regulation

From Nudging to Budging: Using Behavioural Economics to Inform Public Sector Policy

Is it possible to design a regulatory mechanism to budge the private sector away from socially harmful acts?. Adam Oliver, from LSE offers his view at the Journal of Social Policy:
The role of government is not, for the most part, to interfere with personal lifestyle choices unless those choices present harms – or negative externalities – to others, although the government may be warranted in enforcing some behaviours designed to protect people principally from themselves if the intervention is considered openly and explicitly and supported widely, such as seatbelt legislation. The most effective way of preventing people or organisations harming others is to regulate their activities. Nudge is anti-regulation, but behavioural economics is not.
An awareness of the main behavioural economic findings – for example, present bias, reference points, loss aversion and nonlinear probability weighting – can help to inform decisions on where and how to regulate (for instance, traffic light food labelling), and may also ensure that public officials gain a better understanding of their own decision making limitations.
As I have said before, the idea sounds appealing, its implementation remains uncertain.

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