People and policy : behavioural economics and its policy implications

Dickson, Alex and Fongoni, Marco (2015) People and policy : behavioural economics and its policy implications. Fraser of Allander Economic Commentary, 38 (3). pp. 93-106. ISSN 2046-5378

[img] PDF (FEC_38_3_2015_DicksonAFongoniM)
FEC_38_3_2015_DicksonAFongoniM.pdf
Final Published Version

Download (291kB)

    Abstract

    The standard approach of economic modelling and policy analysis is to assume that people are homo economicus: a rational and self-interested economic man. However, a well-documented body of evidence suggests that human decision makers depart from this assumption in several interesting ways. This paper explores three key behavioural aspects – loss aversion; present-biased preferences; and social preferences. It considers the evidence to support them; how behavioural economists have modified economic models to capture the implications of each modification; and how they offer new insights on the scope and efficacy of a wide range of policy interventions.