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2014.03.01 - NAEC Workshop on Behavioural Economics_Alberto Alemanno


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2014.03.01 - NAEC Workshop on Behavioural Economics_Alberto Alemanno

  1. 1. Behavioural Regulation Alberto Alemanno HEC Paris NYU School of Law New Approaches to Economic Challenges Workshop on Behavioural Economics 31 March 2014
  2. 2. our understanding of regulation is set to change as a result of behavioural sciences
  3. 3. involve the systematic analysis and investigation of human behaviour through controlled and observation.
  4. 4. how humans actually behave (when they make choices)
  5. 5. humans are not
  6. 6. but
  7. 7. Rational Reflective Impassive Irrational Intuitive Emotional
  8. 8. Why this matters for policymakers?
  9. 9. a few illustrations of insights from behavioural research
  10. 10. 1. framing 90% OK 10% SIDE EFFECTS around 70% around 35%
  11. 11. even small apparently insignificant details can have major impact on people’s behaviour
  12. 12. 1. framing The location of food items in a cafeteria
  13. 13. produce some unexpected impact
  14. 14. i.e.
  15. 15. You are able to increase/decrease the consumption of many items by as much as 25%
  16. 16. lesson learned • people influenced by how information is framed • choices not affected by properties but frame  context matters
  17. 17. 2. the power of inertia
  18. 18. lesson learned • Automatic enrollment more participation • Inertia means default matters
  19. 19. 3. Social influence + 25%
  20. 20. 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
  21. 21. Lesson learned how actually people make choices?
  22. 22. an alternative view of human agent of utmost importance for policymakers
  23. 23. success of policymaking depends on understanding of people’s behaviour
  24. 24. yet despite failure to predict people’s behaviour little efforts at understanding ‘behaviour’ in policy circles.
  25. 25. Why so?
  26. 26. 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
  27. 27. generally • no formal recognition • timid use of behavioural research • lack of systematic integration in policymaking
  28. 28. avantgarde
  29. 29. 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”.
  30. 30. 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
  31. 31. The features of Behavioural Regulation
  32. 32. The appeal
  33. 33. 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
  34. 34. The flaws
  35. 35. • New paternalism • Intrusiveness: a threat to liberty! • Ineffective/lack of evidence • Non transparent • Ethical unacceptable • Unintended side effects: – Infantilization – Hindrance to moral development
  36. 36. 1st assessment of Nudge-inspired policies
  37. 37. regardless of what you think, a new principle enlightening regulation
  38. 38. you should regulate how people behave not how they are assumed to behave.
  39. 39. Thank you for your attention! more at