© Copyright JASSS

JASSS logo ------

The Behavioral Foundations of Public Policy

Shafir, Eldar (ed.)
Princeton University Press: Princeton, NJ, 2013
ISBN 9780691137568 (hb)

Order this book

Reviewed by Flaminio Squazzoni
Department of Economics and Management, University of Brescia, Italy

Cover of book This year, on September 30 in Brussels, some 300 people - including academics, leading executives in public institutions, businesses and non-governmental organisations - gathered at a conference organised by the European Commission’s Directorate General for Health and Consumers to discuss how behavioural insights could inform policy making (see Van Bavel 2013). This followed two important institutional initiatives, such as the establishment of the Behavioural Insights Team, within the Cabinet Office by the Prime Minister David Cameron shortly after his election in Britain and that of the Social and Behavioral Science Team at the White House office of Science and Technology Policy. The aim of these initiatives is to explore a behaviourally-friendly approach to policy that overcomes the weaknesses of the dominant policy paradigms, which mainly revolve around the mantra of incentives, instructions and hyper-regulation. While a behaviourally-inspired policy cannot fully discard more conventional options based on positive/negative incentives and norms, there are many examples of successful policies that achieved relevant outcomes by following an experimental approach (i.e., setting up controlled experiments before the implementation of a given option) and exploiting what we know about the 'non-rational' side of individual behaviour, e.g., bias and heuristics.

A good example is the UK tax letter. In 2001, the UK Behavioural Insights Team conducted a trial to understand how to increase the repayment rate of overdue taxes. The aim was to reduce the considerable loss of interest by the British government. The idea was to exploit social norms, such as the willingness of people to conform, rather than exploring positive/negative incentives. Reminder letters were sent to targeted people that simply reported that most people paid their taxes on time. This trial increased repayment rates up to 15% in six weeks, with ₤30 million of possible extra revenues yearly for the government.

This is an example of the idea popularised by Thaler and Sunstein in their famous bestseller on "“nudges" (Thaler and Sunstein 2009). Improving policy by incorporating insights from behavioural sciences is also a means to erode the monopoly of economists and lawyers in policy and provide room for a new figure, i.e., the "applied behavioural scientist", capable of offering new neuro-scientific and psychological foundations to policy.

This book is a must read for anyone interested in this 'new' behaviourally-friendly policy making. There is an interesting foreword by Daniel Kahneman, who launched the label "applied behavioural science" to defend the psychological roots of this approach from the dominance of behavioural economists. The book includes 30 chapters by a group of leading American psychologists. Topics span from prejudice and discrimination (e.g., "The Nature of Implicit Prejudice. Implications for Personal and Public Policy", by Curtis D. Hardin and Mahazarin R. Banaji and "Biases in Interractial Interactions", by J. Nicle Shelton, Jennifer A. Richeson and John F. Dovidio), to finance and economics (e.g., "Choice Architecture and Retirement Saving Plans", by Shlomo Benartzi, Ehud Peleg and Richard H. Thaler, "Behavioral Economics Analysis of Employment Law", by Christine Jolls and "Decision Making and Policy in Contexts of Poverty" by Sendhil Mullainathan and Eldar Shafir), from voting (e.g., "Rethinking Why People Vote. Voting as Dynamic Social Expression", by Todd Rogers, Craig R. Fox and Alan S. Gerber) to crime (e.g., "Behavioral Issues of Punishment, Retribution, and Deterrence", by John M. Darley and Adam L. Alter) and environmental problems (e.g., "Doing the Right Thing Willingly. Using the Insights of Behavioral Decision Research for Better Environmental Decisions", by Elke U. Weber and "Overcoming Decision Biases to Reduce Losses from Natural Catastrophes", by Howard Kunreuther, Robert Meyer and Erwann Michel-Kerjan).

Each chapter summarises empirical and/or experimental findings and discusses policy implications of behavioural issues. Across all the chapters, there is the general idea that human behaviour has interesting, sophisticated nuances, such as bias, heuristics, emotions and unconscious and implicit constructs, that should be considered before implementing policy interventions. It is a refreshing reading for anyone sceptical about the excessive confidence that policy makers have on economics and utility theory and provides a common and coherent point of view. There are chapters intimately linked to social psychology (e.g., "Psychological Levers of Behavioral Change", by Dale T. Miller and Deborah A. Prentice, "Perspectives on Disagreement and Dispute Resolution", by Lee Ross and "Psychic Numbing and Mass Atrocity", by Paul Slovic et al.), others more related to a general theory of choice (e.g., "Decisions by Default", by Eric J. Johnson and Daniel G. Goldstein and "Choice Architecture", by Richard H. Thaler, Cass R. Sunstein and John P. Balz). An interesting part of the book is addressed to implications of behavioural insights for law and legal systems (e.g., "False Convictions", by Phoebe Ellsworth and Sam Gross). There are also commentaries that discuss problems and limitations, such as how to embed behavioural insights in economic policy to avoid that this is only a "local approach" to behavioural economic policy ("Psychology and Economic Policy", by William J. Congdon), how to use this approach to mitigate bias of policy makers themselves ("Quis custodiet ipsos custodies?", by Paul Brest) and how to discriminate between good and bad paternalism ("Paternalism, Manipulation, Freedom, and the Good", by Judith Lichtenberg).

This said, there is an elephant in the room that social scientists and social simulation scholars will easily spot in this book. In none of the contributions, there is reference to social networks or social interaction effects, i.e., the idea that individual behaviour is socially embedded. While this book is an important advance, especially compared to the idea of rationality and incentive-based responses that inform conventional policy, the fact of neglecting the social dimension of individual behaviour leads behaviourally-friendly policy to miss an important part of reality.

This weakness has a relevant policy implication. Indeed, there are already examples of pitfalls of policy when the social dimension of individual behaviour is not considered, as well as advantages of considering this dimension for policy purposes. For instance, let us consider the importance of social networks for health, which is a prominent field of research also due to growing ageing and longevity of people in contemporary societies. Recent studies on disease, obesity and alcohol abuse found a strong effect of social networks on people’s choices and showed that any policy intervention, if targeted only on isolated individuals, can fail to produce desirable outcomes. Policies to reduce smoking and other health problems were more successful when they included peer support, so changing the social network of individuals involved (e.g., Smith and Christakis 2008). Also the potentials of social norms and social imitation, which are deeply investigated in social simulation and recent behavioural experimental research and have been successfully used in certain policy campaigns, are not explored as needed (e.g., Epstein 2006).

My opinion is that people are not only nudged by policy makers but also by their peers. Peer effect can swamp policy-induced nudges, amplify them or make them irrelevant, depending on the context. Extensions of the "nudge" approach towards considering the social dimension more explicitly are needed also to understand the importance of positive/negative systemic externalities of policy. This could also help to contemplate the idea of amplifying the typical unit of cost-benefit analysis and evaluation of policy, which is now typically the individual target, towards more sophisticated social units, such as networks, groups or other social aggregates. In short, my opinion is that this book is a bit psychologically biased.

To conclude, although with certain limitations mentioned above, this book is food for thought for social simulation researchers. First, it can provide solid basics to explore behaviourally-informed policy models. Secondly, it can stimulate us to extend the new promising field of "applied behavioural science" to an "applied social behavioural science" approach, capable of including social interaction and network effects in policy design, implementation and evaluation.

* References

EPSTEIN, J. M. (2006). Generative Social Science. Studies in Agent-Based Computational Modeling. Princeton: Princeton University Press

SMITH, K. P., Christakis, N. A. (2011). Social Networks and Health. Annual Review of Sociology, 34, pp. 405-429

THALER, R. H. and Sunstein, C. R. (2009). Nudge: Improving Decisions about Health, Wealth, and Happiness. London: Penguin Books.

VAN BAVEL, R, Herrmann, B., Esposito, G., Proestakis, A. (2013). Applying Behavioural Sciences to EU Policy-making. JRC Scientific and Policy Report, Brussels, available at: http://ec.europa.eu/dgs/health_consumer/information_sources/docs/30092013_jrc_scientific_policy_report_en.pdf


ButtonReturn to Contents of this issue