Behavioural Economics And Policy In Canada

One of the most interesting things about behavioural economics is that it is quite practical. Insights can be applied, often directly, to issues in the public sphere. Furthermore, many of the ideas generated in behavioural economics are simple tweaks — tweaks can be very cheap which often makes the ideas popular with politicians. After all if you can improve the effectiveness of public policy without taxing people more why wouldn’t you?

In discussing the work by Canadian governmental agencies French and Oreopoulos discuss the idea that interventions can be divided into “low-touch” and “high-touch” nudges.  As they say, “…low-touch nudges are often cheaper to implement and focus on making decisions more salient and simpler for the individual” (French and Oreopoulos, 2016). There seems little reason not to do low-touch nudges, such as redesigning forms to make them easier to fill in. They are often close to costless and so any benefits gained are a bonus.

High-touch nudges are more elaborate; the authors give the example of motivational interviewing. This is an approach to help jobseekers transition into work. Such interventions are a little beyond what we might normally think of as nudges, but governments often already provide such support. The key difference in using behavioural insights to inform policy is that what works, given the way people actually behave, is considered and the results tested. These high-touch nudges are likely to be expensive so people may have different views about whether these represent good things for public agencies to do. That said, when interventions are being conducted hopefully public agencies will try to help people as effectively as they can for the money invested.

I think the use of behavioural insights to inform the actions of public agencies is one of the most exciting trends of recent years. It is interesting to see how French and Oreopoulos detail what Canadian agencies are up to.

Read: Robert French and Philip Oreopoulos (2016) Applying Behavioural Economics to Public Policy in Canada, NBER working Paper 22671