Lecture 6: Impacting individual behaviours Flashcards
why is a focus on individual behaviours, including citizens in changing the society, important?
because a same policy may not work the same way in different groups of population or at different scale
assumptions of policy theory
- normative assumption
- causal assumption
- final assumption
normative assumption
about what should be; is acceptable etc.
–> reduction of temperature of 1,5 or 2? Economic growth? Well-being?
causal assumption
about the causes of a problem
–> human made, but consumers fault / companies fault / capitalism fault?
final assumption
about which solutions will serve the policy goal
–> nuclear or wind energy? / change behaviours / regulate companies
where does successful implementation of policies depend on?
acceptance of the policy by the targeted groups
outputs
the immediate, easily measurable effects of a policy
outcomes
the ultimate changes that a policy will yield (actual, long term change in society)
examples of outputs
(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.
examples of outcomes
(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.
behavioural economics
- neoclassical + phychology
- concerns about the weakness of neoclassical economics
- seeks to providing micro-foundations for our choices
behavioural economics: neoclassical + psychology
trying to extent neoclassical economics, by reviewing the boundaries of it, because people are not perfectly rational
behavioural economics: concerns about weakness neoclassical economics
explores alternative of prefect rationality
behavioural economics: providing micro-foundations for our choices
why do we choose this, random/patterns of rationality in for example groups
Bounded rationality (not full rationality)
- non-standard preferences
- non-standard beliefs
- non-standard decision-making
non-standard preferences
social- and time preferences
non-standard beliefs
overconfidence, tendency to extrapolate
non-standard decision-making
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
nudging
positive reinforcement and indirect suggestions
examples nudging
- Use of feedback mechanisms
- Goal setting and commitment devices
- Social identity
- Social proof
how do we influence behaviours
- Simplification and framing of information
- Changes to the physical environment
- Changes to the default policy
examples: simplification and framing of information
playing on emotion, prevent information overload
example: changes to the physical environment
change the appearance of recycle bins
example: changes to the default policy
changing the default temperatuer of a thermostat
direct methods to influence behaviour
education, legislation, reward and punishment
coercion example
pay fine in case of bad behaviour
reward example
discount on products if you’re acting well
market mechanism / incentives examples
tax or subsidy when buying for example a car
nudging: social proof
seeing solar panels on a neighbours’ home
two extreme investment personalities
- risk taker
- risk adverse
risk taker
total comfortable making a risky choice with extreme positive/negative outcomes
risk adverse
wants to be sure to make the right choice
where is any investment in neoclassical economy decided by?
expected pay of and utility
risks in neoclassical economics
People don’t take risks; they are risk neutral in the neoclassical economics.
Discrepancy between participants of pension funds and the investments pension funds actually make
- 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
