Saturday, August 03, 2013

Shafir (ed) The Behavioural Foundations of Public Policy

I have spent a lot of time recently with the excellent "Behavioral Foundations of Public Policy" edited by Eldar Shafir, another of the tremendous series of books in this area published by Princeton University Press over the last few years. The book has an amazing scope from across decision science, behavioural economics, behavioural science, judgement, cognition, social psychology and many policy domains. It is, in many ways, a manual for interdisciplinary public policy training drawing from these disciplines.

The book starts with a foreword by Daniel Kahneman and introduction by Eldar Shafir, followed by 30 chapters grouped into nine areas: Prejudice and Discrimination; Social Interactions; The Justice System; Bias and Competence; Behavioral Economics and Finance; Behavior Change; Improving Decisions; Decision Contexts; Commentaries.

Kahneman's introduction talks about the origins of behavioral science teaching in the Woodrow Wilson school along with Shafir and Rob McCoun. He describes the increasing interest among policy-makers in the area of behavioural economics. He refers to a "landscape change" occurring at the turn of the century in how behavioural work influenced policy, in particular referencing the Save More Tomorrow work of Thaler and Benartzi and talks about the development of Nudge. He also talks about the important issue of what is the nature of the evolving discipline and argues that behavioral economics is not a good umbrella phrase for the type of work being conducted in the policy area at present. Instead he opts for behavioral science or applied behavioral science saying "I would be proud to be called an applied behavioral scientist...". The main idea is that there are many disciplines including psychology and economics feeding into this renewed agenda. Intriguingly Kahneman uses the phrase "We are all Lewinians now" to capture the idea that the person-environment interaction is at the heart of this approach to policy.

If time permitted, I would go through each of the chapters but Shafir's introduction is a good summary of each of them. A few particular things strike me and are going to influence how I think about teaching in this area. The first section, consisting of three chapters, deals with prejudice and discrimination, including implicit attitudes. I have to admit that this is an area I have not treated in depth in previous courses and is a big omission. Joint coursesbetween economists and psychologists in areas like the labour market could certainly benefit from assigning these three chapters as reading.

Part 5 on behavioral economics and finance and part 8 on decision contexts will be most familiar to those interested in "behavioral economics". Part 5 has chapters by Benarzi, Perg and Thaler on pensions, Jolls on employment law and Mullainathan and Shafir on Poverty. All three chapters would make very interesting applications lectures. The poverty chapter, in particular, would lend itself very well to debates about whether behavioural science contributes to deep, seemingly intractable problems. Darley and Alter's chapter in part 3 on behavioural issues of punishment, retribution and deterrence is another excellent potential lecture in the context of policy. Part 8 looks at defaults (Johnson and Goldstein), choice architecture (Thaler, Sunstein, Balz) and behaviourally informed regulation (Barr, Mullainathan, Shafir). These three chapters would be terrific reading in courses aimed at economics students and regulators.

Part 6 on behavioral change includes chapters on psychological levers of behavior change by Miller and Prentice; mindless eating by Wansink and educational intervention by Garcia and Cohen. Its a good reminder of Kahneman's injunction to stop calling all work applying psychological insights to policy "behavioural economics". Similarly, Parts 2 on co-operation and part 4 on bias would stretch any useful meaning of the term behavioural economics but certainly would be relevant to economics and public policy students.

The final section includes a number of commentaries including by Congdon on psychology and economic policy and Redelmeier on healthcare policy. There is an interesting chapter by Paul Brest on debiasing policy-makers. The final chapter by Julia Lichtenberg "paternalism, manipulation, freedom, and the Good" looks at philisophical and moral issues in public policy in this area.

There is no doubt that this book will make its way onto many courses across public policy schools and related areas. At present, we are beginning a curriculum in behavioural science in a policy-oriented management school and it has provided a lot of food for thought about how to integrate the different disciplines involved. The book will be very helpful in solving, in general, the confusions generated in terms of what behavioural economics adds to conventional economics and psychology. Effectively, the book presents behavioural economics as a newcomer to a party that has been ongoing for decades and the contribution is located within this context. The book's aim is not so much to replace traditional economics with behavioural economics but rather to train potential policy makers in a wide range of insights from different behavioural sciences including behavioural economics. From this context, we avoid some of the tortuous wedging of papers that are clearly from different traditions in psychology into the behavioural economics bracket and instead open our minds to how insights from these traditions impact on policy domains of interest. In his review, Akerlof opens up the possibility that this approach will help release the monopoly of economics on different policy domains but equally the approach pursued may open many policy areas to healthier balance of approaches.

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