Behavioral Economics Approaches to public policy

Title: Behavioral Economics Approaches to public policy
Issue: Vol. 7, No 2, 2014
Published date: 20-09-2014 (print) / 20-09-2014 (online)
Journal: Journal of International Studies
ISSN: 2071-8330, eISSN: 2306-3483
Authors: Adrian Solek
Keywords: behavioral economics, behavioral biases, regulation, paternalism
DOI: 10.14254/2071-8330.2014/7-2/3
Language: English
Pages: 33-45 (13)
JEL classification: D03, H10, L51

The relatively new school of thought – behavioral economics is complementary to the neoclassical model of decision making, as it accounts for psychological factors underlying people’s choices, which are omitted by standard models. Several cognitive tendencies have been identified. These findings may be used by policy makers as tools of furthering desirable behavior of individuals. Such regulation may take the form of either soft or more heavy-handed paternalism. However its implementation raises some criticisms, ranging from practical issues to more fundamental questions of respecting freedom of choice. The presented paper compares the ways in which decisions and choices are addressed in neoclassical and behavioral economics and implications of their assumptions and findings for policy measures that may be taken by the government. Controversies elicited by paternalistic approaches have also been elaborated.