Lecture 6: Impacting individual behaviours

Question 1

why is a focus on individual behaviours, including citizens in changing the society, important?

Answer 1

because a same policy may not work the same way in different groups of population or at different scale

Question 2

assumptions of policy theory

Answer 2

1. normative assumption
2. causal assumption
3. final assumption

Question 3

normative assumption

Answer 3

about what should be; is acceptable etc.

–> reduction of temperature of 1,5 or 2? Economic growth? Well-being?

Question 4

causal assumption

Answer 4

about the causes of a problem

–> human made, but consumers fault / companies fault / capitalism fault?

Question 5

final assumption

Answer 5

about which solutions will serve the policy goal

–> nuclear or wind energy? / change behaviours / regulate companies

Question 6

where does successful implementation of policies depend on?

Answer 6

acceptance of the policy by the targeted groups

Question 7

outputs

Answer 7

the immediate, easily measurable effects of a policy

Question 8

outcomes

Answer 8

the ultimate changes that a policy will yield (actual, long term change in society)

Question 9

examples of outputs

Answer 9

(outputs = the immediate, easily measurable effects of a policy)

Examples of outputs are different bags to recycle / subsidies to install solar panels or that with the support of the EU, public and private agencies are created to support circular economy.

Question 10

examples of outcomes

Answer 10

(outcomes = the ultimate changes that a policy will yield)

Examples of outcomes are growing efforts to divide trash, the grow in installation of solar panels, change of practices and the way they do profits in long-term. Shortly, the long term results of the outputs.

Question 11

behavioural economics

Answer 11

• neoclassical + phychology
• concerns about the weakness of neoclassical economics
• seeks to providing micro-foundations for our choices

Question 12

behavioural economics: neoclassical + psychology

Answer 12

trying to extent neoclassical economics, by reviewing the boundaries of it, because people are not perfectly rational

Question 13

behavioural economics: concerns about weakness neoclassical economics

Answer 13

explores alternative of prefect rationality

Question 14

behavioural economics: providing micro-foundations for our choices

Answer 14

why do we choose this, random/patterns of rationality in for example groups

Question 15

Bounded rationality (not full rationality)

Answer 15

1. non-standard preferences
2. non-standard beliefs
3. non-standard decision-making

Question 16

non-standard preferences

Answer 16

social- and time preferences

Question 17

non-standard beliefs

Answer 17

overconfidence, tendency to extrapolate

Question 18

non-standard decision-making

Answer 18

decision depends on the way the result is presented; humans use a variety of rules of thumb in order to reach a decision more quickly. The amount of influence is depending on how the policy is framed/how the information is presented

Question 19

nudging

Answer 19

positive reinforcement and indirect suggestions

Question 20

examples nudging

Answer 20

• Use of feedback mechanisms
• Goal setting and commitment devices
• Social identity
• Social proof

Question 21

how do we influence behaviours

Answer 21

• Simplification and framing of information
• Changes to the physical environment
• Changes to the default policy

Question 22

examples: simplification and framing of information

Answer 22

playing on emotion, prevent information overload

Question 23

example: changes to the physical environment

Answer 23

change the appearance of recycle bins

Question 24

example: changes to the default policy

Answer 24

changing the default temperatuer of a thermostat

Question 25

direct methods to influence behaviour

Answer 25

education, legislation, reward and punishment

Question 26

coercion example

Answer 26

pay fine in case of bad behaviour

Question 27

reward example

Answer 27

discount on products if you’re acting well

Question 28

market mechanism / incentives examples

Answer 28

tax or subsidy when buying for example a car

Question 29

nudging: social proof

Answer 29

seeing solar panels on a neighbours’ home

Question 30

two extreme investment personalities

Answer 30

1. risk taker
2. risk adverse

Question 31

risk taker

Answer 31

total comfortable making a risky choice with extreme positive/negative outcomes

Question 32

risk adverse

Answer 32

wants to be sure to make the right choice

Question 33

where is any investment in neoclassical economy decided by?

Answer 33

expected pay of and utility

Question 34

risks in neoclassical economics

Answer 34

People don’t take risks; they are risk neutral in the neoclassical economics.

Question 35

Discrepancy between participants of pension funds and the investments pension funds actually make

Answer 35

• Non-financial considerations in pension investments are valued by pension fund participants
• preferences of pension fund participants for responsible invesments are more homogenous than expected
• the proportoin of people with a preference for responsible investments will rise in the coming decades
• non-financial consideration should play a role in the investing policy of pension funds