Behaviourally Informed Government Policy

In a companion piece to the article published on the BEAR (Behavioural Economics In Action at Rotman) website Dilip Soman, Katie Chen, and myself have an article in the Spring issue of the Rotman Management magazine. This is an issue completely dedicated to behavioural insights. It has some major academic names in the field — Richard Thaler, George Loewenstein — and a piece by David Halpern of the U.K.’s Behavioural Insights Team.

We use our article to reinforce the point that government policy should be based upon an empirically informed view of how people behave. This simply means that policy should be set to work with how human beings are, rather than how we think human beings should be. “The problem is, governments struggle with making policy decisions work because the [tools used] are designed for Econs [an economist’s view of how humans should be] rather than humans.” (Soman, Chen and Bendle, 2017, page 8). Robots might always calculate correctly, be completely forward thinking, and always want the same thing. People aren’t like that.

To my mind this has significant political implications. (These are my views not necessarily those of my co-authors). A lot of the arguments that I hear against government action is that people can make their own decisions. This is a reasonable point in many situations; yet I don’t think it covers every situation. People aren’t robots and so sometimes need help. It might not be very ideologically satisfying but one should have a good idea how people behave when deciding upon how much government intervention is the right amount, i.e. when people need help and when they don’t.

To see why intervention is sometimes useful consider that people aren’t always consistent. This is especially true over long periods of time. Older people might wish that their younger selves had put more money away for retirement. Should we just say it was that person’s choice? It was but that seems harsh to me. Human beings aren’t equipped to make perfect judgments about their futures and so we can’t just ignore the plight of people even if they made mistakes to get themselves into their current predicament. The solution to me seems to be making it easier for people to take care of their future selves — we do that by actively encouraging people saving for their own pensions.

If you don’t think people are robots who make every decision perfectly there is potential for government to create policy that benefits the people involved and society as a whole. Lets try and find such policies.

Read: Dilip Soman, Katie Chen and Neil Bendle (2017) Policy by Design: The Dawn of Behaviourally-Informed Government, Rotman Management, Spring, page 7-12.