View
1
Download
0
Category
Preview:
Citation preview
BEHAVIOURAL ECONOMICS IN POLICY MAKING
PROFESSOR IVO VLAEV WARWICK BUSINESS SCHOOL
UNIVERSITY OF WARWICK
This brief talk will cover…
- The rise of behavioural economics
- Examples of policy interventions
This brief talk will cover…
- The rise of behavioural economics
- Examples of policy interventions
Many ways to change behaviour...
What we have learned in over 50 years of research in behavioural economics and 3 Nobel prizes
The psychology of judgment and decision-
making, heuristics and biasesDaniel Kahneman
2002
The concept of behavioural decision-
making, bounded rationality,Herbert Simon
1978
Incorporating psychology into economic
decision-making and nudge theory
Richard Thaler 2017
Consider the environment
It turns out that the
environmental effects
on behavior are a lot stronger
than most people expect
Daniel Kahneman
Nobel Laureate
“
”
REPETITION
Automatic & quickNo voluntary control
Effortless
DECISIONInformation
presentation
Recognised
Not
Recognised
ReflectiveRequires our attention
Effortful
SYSTEM 1
THINKINGPROCESSES
‘FAST’
SYSTEM 2
THINKINGPROCESSES
‘SLOW’
21
Affect heuristic
Bandwagon effect
Default bias
Impact bias
Loss aversion bias
Optimism bias
Order effects
Relative risk bias
The tendency
to prefer
avoiding losses
than acquiring
gains
OVERRIDE
Two types of thinkingAn interactive division of labor
Public Heath England - Behavioural Insights Masterclass
‘Behavioural Insights’
Consider the environment / situation
Cass Sunstein
Professor of Law, Harvard
Regulatory Czar, Obama Administration
Richard Thaler
Professor of Economics, University of Chicago
Behavioural Insight Team, UK Cabinet Office
Consider this...
Schiphol Airport,Amsterdam80% decline in ‘spillage’
And this...
Lake Shore DriveChicago36% fewer crashes
GSR Behaviour Change Knowledge Review
Reference Report: An overview of behaviour change models and their uses Andrew Darnton, Centre for Sustainable Development, University of Westminster July 2008
Despite a plethora of reports, they fail
in a large part to provide an operating framework for
practitioners to use
Anatomy of System 1
MessengerIncentivesNormsDefaultsSaliencyPrimingAffectCommitmentEgo
MINDSPACE motivating behaviour in automatic ways
Messenger
We are heavily influenced by who communicates information to us
Incentives
Our responses to incentives are shaped by predictable mental shortcuts e.g. strongly avoiding losses
Norms
We are strongly influenced by what others do
Defaults
We go with the flow of pre-set options
Salience
Our attention is drawn to what is novel and what seems relevant to us
Primes
Our acts are often influenced by subconscious cues
Affect
Our emotional associations can powerfully shape our actions
Commitment
We seek to be consistent with our public promises, and reciprocate acts
Ego
We act in ways that
make us feel better
about ourselves
This brief talk will cover…
- The rise of behavioural economics
- Examples of policy interventions
Control Country Postcode Town
% compliance to 3 messages:
“9 out of 10 people in your … pay their tax on time”
Norms
We are strongly influenced by what others do
67.5
Control Country Postcode Town
% compliance to 3 messages:
“9 out of 10 people in your … pay their tax on time”
67.572.5
79.083.0
Control Country Postcode Town
% compliance to 3 messages:
“9 out of 10 people in your … pay their tax on time”
MINDSPACE and debt collection
SMS messages sent to customers
Basic message
You received a court summons for council tax. You don’t need to attend court if you make payment or call 08456066683
Norms - Local
You received court summons for council tax. 9 of 10 people in your area pay on time. You don’t need to attend court if you make payment or call 08456066683
Ego – Act is framed as commission rather than omission
You received court summons for council tax. We had treated your lack of payment as an oversight. If you don’t call 08456066683 we'll take it as an active choice
Affect – Monitoring
You received court summons for council tax. We will check how long it takes you to pay. You don’t need to attend court if you make payment or call 08456066683
Incentives – Interest
You received court summons for council tax. Your debt will increase if unpaid. You don’t need to attend court if you make payment or call 08456066683
MINDSPACE and debt collection
7%
10%
14%13%
11%13%
0%
5%
10%
15%
No Text Text 1 Text 2 Text 3 Text 4 Text 5
Customers who made payment within 3 days of SMS Scalable to all instances of
increasing payment :
• Parking
• Penalty notices
• Social care debt
• Business rents
Ego Norms Affect IncentivesBasic
Ego Norms Affect IncentivesBasic
The “rainy day” image prompted customers to put money aside in this account, and they were reluctant to spend it
(mental accounting and loss aversion)
Salience
Our attention is drawn to what is novel and what seems relevant to us
Overall, how helpful have you found using the Budgeting tool?
88% helpful
Affect
Our emotional associations can powerfully shape our actions
Amount
suggested in
Average
repayment
increase
among those
who
responded
£10 138%
£15 159%
£25 214%
Primes
Our acts are often influenced by subconscious cues
MINDSPACE and organ donation
1 Control 2 Norm
3 Norm + Pic 4 Norm + Logo
MINDSPACE and organ donation
MINDSPACE and organ donation
Salience - Costs Salience - Benefits
Ego Commitment
MINDSPACE and organ donation
EgoCommitment Salience Benefit
Salience Cost
MINDSPACE reducingmissed hospital appointments
Condition Message
ControlAppt at [hospital] on [Sep 16] at [10:00am]. To cancel or
rearrange call the number on your appointment letter.
SalienceAppt at [hospital] on [Sep 16] at [10:00am]. To cancel or
rearrange call 020 7767 3200.
Norm
We are expecting you at [hospital] on [Sep 16] at [10:00am]. 9
out of 10 people attend. Please call 02077673200 if you
need to cancel or rearrange.
Ego
We are expecting you at [hospital] on [Sep 16] at [10:00am].
Not attending costs NHS £160 approx. Call 02077673200 if
you need to cancel or rearrange.
MINDSPACE reducingmissed hospital appointments
0
5
10
15
Control Number Norms Costs
DN
A R
AT
E
Message
3.4%1,300 fewer DNAs if
applied to all viable
appointments over
whole trial period
8,000 fewer if
applied over one
year in same
location
320,000 fewer if
applied nationwide= £51.2M
EgoSalienceControl
Increasing uptake of NHS Health Checks
Looking for risk factors associated with related NCDs:
• Diabetes
• Cardiovascular Disease (heart attack and stroke)
• Kidney Disease
• Dementia
Control Treatment
NHS Health Check
You will receive a letter about your NHS Health Check.
Your NHS Health Check is due tomorrow at 13.30.
vs. +
Salience – SMS prompting individuals to attend
Behavioural insights
Your NHS Health Check is due tomorrow.
Salience – the letter was simplified
Incentives – the Check is a time limited opportunity
Messenger – From the individual’s General Practitioner
Commitment – The tear off slip prompts making an appointment
Priming – SMS alerting to the Health Check
You will receive a letter about your NHS Health Check.
NHS Health Check: Results
18%
30%
0%
5%
10%
15%
20%
25%
30%
35%
Standard letter and no
texts
Revised letter and
primer and prompt
messages
Percentage uptake
The power of cute
Affect
Our emotional associations can powerfully shape our actions
MessengerIncentivesNormsDefaultsSaliencyPrimingAffectCommitmentEgo
Recommended