Evaluating Behavioural Policies

Question 1

General Evaluation from mark scheme

Answer 1

• Are some policies better than others e.g. Legislation vs Provision?
• Depend on country by country basis?
• Value for money, cost/ time considerations when deciding if the policy is a good move
• Are some biases / heuristics more suited to govt. intervention?
• Who measures or defines what an ‘improvement’ in decision constitutes?

Question 2

Ethics

Answer 2

• Sunstein - ‘if people are told they are being nudged, they will react adversely and resist’
• Do government have a mandate to alter our behaviour? Should they be allowed to nudge our behaviour may depend on our view on the government
• Sunstein points out that businesses, interested in pursuit of profit often nudge consumers to make inefficient decisions - should the government counter this in the name of social welfare?
• If the policymaker is changing behaviour without mandate approval, is there more scope for govt. failure?

Question 3

Ethics - liberty

Answer 3

• House of Lords 2011, critical of the role of nudges and raised the issue of the ethicality of soft manipulation of the population
• Whether a nudge is ethical may depend on if it is transparent
  HoL decided that choice architects must tell people about the nudge directly or ensure that perceptive consumers can discern the implementation of a nudge
• this could make nudge more effective, individuals being encouraged to be more reflective in decision making
• But does it still work if they’re aware of being nudged? Some recent studies confirmed nudges can be highly effective whilst transparent

Question 4

Accuracy of behavioural insights - Kahneman

Answer 4

• Kahneman in Thinking Fast and Slow - found how differently the economics department viewed human behaviour to the psychology department
• ‘Psychologists’ it is self evident people are neither fully rational nor completely selfish - our disciplines seemed to be studying different species

Question 5

Accuracy of behavioural insights - society

Answer 5

• Experimental approach to formulating public policy truly representative of society as a whole?
• Critics believe Behavioural Economists, especially those tied to the profit seeking enterprise tend to overclaim + overgeneralise based on small studies carried out in a v. different context
• Their participants are overwhelming Western, educated and from industrialised rich academic countries - so some insights aren’t applicable to all regions

Question 6

Nudges failing

Answer 6

• Where government policy fails to achieve a better policy than the conventional approach:
• Individuals perceive that their peers are less likely to engage in positive behaviours compared to their own decision making - choice architects hope to alter behaviour but are unresponsive to the nudge as they believe their peers are making poor decisions anyway
• Sense of personal superiority in decision making also been seen in handwashing and infection control behaviours and fruit and vegetable consumption

Question 7

Nudges wear off

Answer 7

• Large effects first few times used, lower effects on subsequent applications
• ‘attention is a scarce resource’ claimed Sunstein, explains our inability to follow axioms of EUT
• Uk’s 5p bag charge altered to 10p bag charge to reflect a rebound effect in that plastic bag consumption increased after initially dramatic fall in usage
• Most effective nudges are the long term ones based on the use of defaults , individuals defaulted to stick to pension plans (Thaler’s Save More Tomorrow scheme)

Question 8

Combination of policies

Answer 8

• Important to use a ‘cocktail of policy options’
• the way in which fruit and veg are displayed and discounted - when an individual is under cognitive load - can lead to an increase in fruit and veg purchasing
• demosntrates power of choice architecture - discount displayed in a CERTAIN WAY seems to alter behaviour
• Fruit and veg bundles which had a discounted price led to the largest percentage of fruit and veg bundles being selected
• Traditional and behavioural polcies can be used together - discount coupled with discount being displayed in an attractive way had a larger impact

Question 9

Small scale effects

Answer 9

Some critics highlight the small impacts that nudges have