Book News: May 20th, 2008

By Jessica Prendergrast, Beth Foley, Verena Menne and Alex KaralisIssac.

This book challenges the Government to develop a broader approach to policymaking. It outlines how lessons from the field of behavioural economics can help tackle urgent policy priorities, including reducing obesity, and reducing car-use.

The authors argue that much traditional policy-making is based on a narrow belief in the ‘rational economic man’ who will respond to financial incentives. However, people’s decision making is much more complex. Too many choices actually discourage people from making a decision. Reducing the number of choices, and sometimes creating a ‘default choice’, or an auto-enrolment scheme, is an important tool for increasing the uptake of pensions, savings and insurance.

It describes how social as well as financial rewards, can provide incentives. Even something as simple as a green sticker displayed in the windows of low-emissions vehicles, has been shown to increase the use of these vehicles instead of gas guzzlers.

The authors believe that instead of focusing on the proximity of sports facilities and the cost of using them, it is important to help people to overcome perceptions of themselves as “non-sporty”. An increase in non-competitive sports in schools may be the answer.

Focusing on external factors such as tax is limiting the options for change. People’s decision are affected by a whole other range of psychological and social factors. Often, choices are based on non-economic criteria such as ‘rule-of-thumb’, social norms and habit. By ignoring these factors, policy-makers are operating with one-hand tied behind their back.

Published by The Social Market Foundation.