Behavioural Public Policy - Latest issue

Behavioral economics and field experiments within the social sciences have advanced well beyond academic curiosum. Governments around the globe as well as the most powerful firms in modern economies employ staffs of behavioralists and experimentalists to advance and test best practices. In this study, we combine behavioral economics with field experiments to reimagine a new model of early childhood education. Our approach has three distinct features. First, by focusing public policy dollars on prevention rather than remediation, we call for much earlier educational programs than currently conceived. Second, our approach has parents at the center of the education production function rather than at its periphery. Third, we advocate attacking the macro education problem using a public health methodology, rather than focusing on piecemeal advances.

Behavioural science is increasingly applied to policy in many countries. While the empirical approach to policy development is welcome, we argue with reference to existing literature that laboratory experiments are presently underused in this domain, relative to field studies. Assumptions that field experiments, including randomised controlled trials, produce more generalisable results than laboratory experiments are often misplaced. This is because the experimental control offered by the laboratory allows underlying psychological mechanisms to be isolated and tested. We use examples from recent research on energy efficiency and financial decision-making to argue that mechanism-focused laboratory research is often not only complementary to field research, but also necessary to interpreting field results, and that such research can have direct policy implications. The issues discussed illustrate that in some policy contexts a well-designed laboratory study can be a good – perhaps the best – way to answer the kinds of research questions that policy-makers ask.

Over the last decade, health care in many parts of the world has shifted toward a more patient-centric, consumeristic model, marked by an emphasis on choice and a proliferation of typical consumer-facing information (e.g. price and quality data). However, while the ‘patients as consumers’ perspective is an apt one, there are crucial differences between health care and typical consumer domains that warrant special consideration by policy-makers and researchers alike. This article discusses some of these differences and explores the challenges that consumers (i.e. patients) face when making trade-offs between price and quality.

Behavioural economic research has established that defaults, one form of nudge, powerfully influence choices. In most policy contexts, all individuals receive the same nudge. We present a model that analyses the optimal universal nudge for a situation in which individuals differ in their preferences and hence should make different choices and may incur a cost for resisting a nudge. Our empirical focus is on terminated choosers (TCs), individuals whose prior choices become no longer available. Specifically, we examine the power of defaults on individuals who had enrolled in Medicare Advantage plans with drug coverage and whose plans were then discontinued. Currently, if these TCs fail to actively choose another Medicare Advantage plan, they are defaulted into traditional fee-for-service Medicare (TM) without drug coverage. Overall, the rate of transition of TCs into TM is low, implying that original preferences and status quo bias overpower the default. Increasing numbers of Americans are choosing plans in health insurance exchange settings such as Medicare, the Affordable Care Act and private exchanges. Plan exits and large numbers of TCs are inevitable, along with other forms of turmoil. Any guidance and defaults provided for TCs should factor in their past revealed preferences.

Limits on consumer attention give firms incentives to manipulate prospective buyers’ allocation of attention. This paper models such attention manipulation and shows that it limits the ability of disclosure regulation to improve consumer welfare. Competitive information supply from firms competing for attention can reduce consumers’ knowledge by causing information overload. A single firm subjected to a disclosure mandate may deliberately induce such information overload to obfuscate financially relevant information or engage in product complexification to bound consumers’ financial literacy. Thus, disclosure rules that would improve welfare for agents without attention limitations can prove ineffective for consumers with limited attention. Obfuscation suggests a role for rules that mandate not only the content, but also the format of disclosure; however, even rules that mandate ‘easy-to-understand’ formats can be ineffective against complexification, which may call for regulation of product design.

‘Nudge’ is a concept of policy intervention that originates in Thaler and Sunstein's (2008) popular eponymous book. Following their own hints, we distinguish three properties of nudge interventions: they redirect individual choices by only slightly altering choice conditions (here ‘nudge 1’); they use rationality failures instrumentally (here ‘nudge 2’); and they alleviate the unfavourable effects of these failures (here ‘nudge 3’). We explore each property in semantic detail and show that no entailment relation holds between them. This calls into question the theoretical unity of nudge as intended by Thaler and Sunstein and most of their followers. We eventually recommend pursuing each property separately, both in policy research and at the foundational level. We particularly emphasise the need for reconsidering the respective roles of decision theory and behavioural economics to delineate nudge 2 correctly. The paper differs from most in the literature in focusing on the definitional rather than the normative problems of nudge.

Common principles for resource allocation in health care can prioritise the alleviation of small health burdens over lifesaving treatment. I argue that there is some evidence that these principles are at odds with a sizable share of public opinion, which holds that saving a life should take priority over any number of cures for minor ailments. I propose two possible explanations for this opinion, one debunking and one vindicatory. I also outline how well-designed surveys and moral enquiry could help decide between them. Finally, I consider how priority-setting principles could be adjusted if the view that saving a life always trumps alleviating small burdens were vindicated.