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Everyone would be expected to know:
- The difference in approach between behavioural and traditional economics.
- The kinds of influences that behavioural economics studies.
- Approaches to economics that reject the rational actor model have come to be known as behavioural economics, as they supposedly assess how individuals actually behave rather than making assumptions at the outset.
Video –Behavioural Economics: Crash Course Economics
Due to a growing confidence in the results of these studies there has been an attempt to use these results in policy. In light of this a recent government report, Mindspace, aimed to helpfully categorise some of the potential influences such studies have discovered about human behaviour. Mindspace is an acronym that stands for the following principles:
Messenger - we are heavily influenced by who communicates information.
Incentives - our responses to incentives are shaped by predictable mental shortcuts such as 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 seems relevant to us.
Priming - our acts are often influenced by sub-conscious cues and our emotional associations can powerfully shape our actions.
Affect – our emotional associations can powerfully shape our actions.
Commitments - we seek to be consistent with our public promises, and reciprocate acts.
Ego - we act in ways that make us feel better about ourselves.
The significance of this is best explained through the use of case studies, but the 3 key things to remember are:
- Our decisions and behaviour are influenced by much more than outcomes.
- These influences can be, but are not always, conscious. For example individuals are probably aware when they attempt to act to fulfil public commitments of their behaviour, but would be less aware of the influence of salience on their decision making process.
- These influence can be deliberately employed in policy, for example organ donor lists have been deliberately made opt out rather than opt in by some countries to increase numbers registered, taking advantage of the tendency to go for the default.
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