Behavioural Economics Workshop, OECD, Paris - 31 March 2014
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Transcript of Behavioural Economics Workshop, OECD, Paris - 31 March 2014
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Behavioural Regulation
Alberto Alemanno HEC Paris
NYU School of Law
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our understanding of regulation
is set to change as a result of
behavioural sciences
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involve the systematic analysis and investigation
of human behaviour through controlled and
observation.
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how humans actually behave
(when they make choices)
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humans are not
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but
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Rational
Reflective
Impassive
Irrational
Intuitive
Emotional
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Why this matters for policymakers?
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a few illustrations of
insights from behavioural research
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1. framing
90% OK 10% SIDE EFFECTS
around 70% around 35%
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even small apparently insignificant details can have major impact on people’s behaviour
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1. framing
The location of food items in a cafeteria
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produce some unexpected impact
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i.e.
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You are able to increase/decrease the consumption of many items
by as much as 25%
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lesson learned
• people influenced by how information is framed
• choices not affected by properties but frame
context matters
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2. the power of inertia
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lesson learned
• Automatic enrollment more participation • Inertia means default matters
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3. Social influence
+ 25%
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but also
• Anchoring - tendency to rely too heavily on one piece of information when making decisions
• Loss aversion/Endowment effect – A loss from the status quo perceived as more undesiderable than a gain
• Group polarization/Confirmation bias - to favor information that confirms preconceptions regardless of whether the information is true
• Zero-risk bias – preference for reducing a small risk to zero over a greater reduction in a larger risk
• Informational cascades • Choice and information overload
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Lesson learned
how actually people make choices?
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an alternative view of human agent
of utmost importance for policymakers
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success of policymaking depends on understanding
of people’s behaviour
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yet
despite failure to predict people’s behaviour
little efforts at understanding ‘behaviour’ in policy circles.
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Why so?
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while behavioral research demonstrates the extent and limits of rational action, it does not
provide regulators with a ready-made framework for incorporating its insights into
policy making
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generally
• no formal recognition • timid use of behavioural research • lack of systematic integration in policymaking
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avantgarde
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EO 13563 June 2012
“where relevant, feasible, and consistent with regulatory objectives…each agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. These approaches include
warnings, appropriate default rules, and disclosure requirements as well as provision of information to the public in a form that is clear
and intelligible”.
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Randomised controlled trials (RCTs)
Random allocation to groups
RCT is an experimental design which involves random allocation of participants, either to an experimental group which receives some form of ‘treatment’ or intervention, or to a control group which receives no such special treatment or intervention.
experimental group
control group
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The features of Behavioural Regulation
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The appeal
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Conventional Regulation
• Reduce the options set by legislating against risky behaviour
• Rests on the assumption that
people behave rationally
• Top-down: requires bureaucratic oversight
• Exaggerates the prevalence of
risky behaviour
• Evidence-based (real)
• Adversial to the industry
Behavioural Regulation
• Changes the environment in which the choice is made to make risky behaviour less likely
• Rests on the assumption that
people conditioned by environment
• Bottom-up: less funding • Play down the reality and depicts
abstention as the social norm
• Evidence-based (laboratory-setting)
• Cooperative with the industry
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The flaws
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• New paternalism • Intrusiveness: a threat to liberty! • Ineffective/lack of evidence • Non transparent • Ethical unacceptable • Unintended side effects:
– Infantilization – Hindrance to moral development
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1st assessment of Nudge-inspired policies
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regardless of what you think,
a new principle enlightening
regulation
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you should
regulate how people behave
not how they are assumed to behave.
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Thank you for your attention!
more at www.albertoalemanno.eu