To Guide The Human Puppet: Behavioural economics, public policy and public service contracting

Lauren Cumming, November 2012



“To guide the motions of the human puppet, it is necessary to know the wires by which he is moved.” ~ Helvetius

The exciting new tool in the policymaker’s toolkit is a hybrid created by economists drawing on behavioural psychology, known as ‘behavioural economics’. Among those who have shown interest are American Democratic presidential candidate Barack Obama and British Conservative leader David Cameron.

Nudge, the book that has popularised behavioural economics and translated it into policy-speak proposes an attractive way for policymakers to influence decision-making without increasing spending or resorting to ‘nannying’. The authors, Thaler and Sunstein, advocate a regulatory architecture that guides the citizen to select a predetermined ‘best’ option while leaving alternatives open. Thaler and Sunstein call their approach libertarian paternalism, an example of the ‘Third Way’ language that makes behavioural economics particularly appealing to politicians.

Behavioural economics is the flavour of the month and is likely to remain prominent in public discourse in the near future. Many of the insights of behavioural economics are not new; however, policymakers must welcome the analysis and debate that has accompanied the popularisation of academic research that would otherwise have remained largely inaccessible. The danger lies in relying too heavily on popular accounts of unfamiliar policy interventions where the consequences are not well understood. Even in the field of public service contracting, where there is now a wealth of experience with the science of ‘nudge’, the conditions for success and failure are not always predictable, and much of the accumulated wisdom rests with practitioners making incremental improvements at the front line. Behavioural economics might learn from this history of trial-and-error rather than relying so heavily on laboratory results.

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A discussion of behavioural economics, public policy and public contracting.

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