How can instinctive preferences improve policy outcomes?
Why do people in some countries donate organs more than in others? Why do we not save enough for retirement even when we can afford to? Why don’t we buy energy-efficient appliances that save us money in the long run? How can more people be encouraged to live healthily?
Around the world, policy makers have begun to pay attention to the growing field of behavioural economics. Instead of assuming that citizens are the rational, interest-maximising agents of economics textbooks, behavioural economics starts with the more realistic assumption that people are shaped by cognitive biases, complications and limitations. Our rationality, self-control and self-interest are all bounded in ways that have implications for the way we design and implement public policies.