Behavioural Economics

Question 1

Loss aversion (?;?) & (?;?)

Answer 1

Thaler 1980 the endowment effect = people demand more to give up an object than they’d be willing to pay to acquire it
Samuelson and Zeckhauser 1988 Status quo bias = a preference for the current state

Question 2

Hyperbolic discounting (?;?)

Answer 2

Hepburn et al 2010
= agents have diminishing impatience - they discount the future with declining discount rates; the present is given particular salience
E.g. canadian cod –> overestimation of pop. = harvesting at above optimal levels and collapse of the stock —- because fishing interests and policymakers wanted to justify higher catches in the present

Question 3

Ethical discount rate (?;?)

Answer 3

Stern 2007

Future and present generations given equal weight = very low discount rate

Question 4

Heuristics and biases - definition and 3 examples

Answer 4

Deviations from rationality

• Bandwagon effects = probability of adopting a belief increases based on number of people who hold it
• Framing effect = people react to a choice depending on how it is framed e.g. as a gain/loss
• Optimism bias = belief they’re less at risk of experiencing negative event than others

Question 5

Libertarian paternalism

incl. (?;?)

Answer 5

libertarian respects freedom of choice
paternalism = people will make systematic errors that aren’t in their interests
= design choice architecture to maximise chance people will make good decisions
Nudge: Thaler and Sustein 2008
- defend libertarian paternalism – makes lives longer, healthier and better

Question 6

Regret theory and the tyranny of choice (?;?)

Answer 6

Irons and Hepburn 2007
more chain can inhibit decision-making and sometimes prevent it altogether
Regret theory = people avoid situations where they appear ex poste to have made wrong decision
= paternalistic regulation may be appropriate - limit number of choices

Question 7

Neurocapitalism (?;?)

Answer 7

Pykett 2013
Popularity of neuroeconomics and behavioural economics in public, policy, and business
Geographers need to engage more critically with neurocapitalsim
Doesn’t regard political-economic inequality
Driven by commercial interests of pharmaceutical industry, state imperatives for self-governing populations –> ideal citizen-subjects
Biological determinism - ‘monkey models’ of human consciousness = no space for responsibility, ethical deliberation, social/political debate

Question 8

Behaviour Change and Energy Use report (?;?)

Answer 8

Behavioural Insights Team @ Cabinet Office; 2011
Discount future = barrier to energy efficiency improvements –> need to reward individuals for taking action
Social norms = influence of others –> comparative energy consumption information can help people reduce energy use
Defaults = people go with pre-set options –> change these e.g. optimal core hours windows for heating and cooling systems

Question 9

Effectiveness of feedback for energy consumption (?;?)

Answer 9

Darby 2006 for DEFRA
A learning tool for energy users
Feedback on gas and electricity consumption
Necessary for energy savings - makes energy visible

Question 10

“Behavioural lock-in” in energy consumption (?;?)

Answer 10

Maréchal 2010
Energy consumption behaviour guided by habits
= policies should target new residents - habits disturbed
= explains low effectiveness of traditional measures e.g. incentives
= joint use of feedback and social commitment measures