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Day 1 - Monday 19th November, 2018
Professor Hiscox will provide a systematic introduction to the science of behavioural economics, reviewing the major insights and how the approach departs from traditional economic models that assume rational decision making. The rest of the day is a “guided tour” that examines the key insights in detail and how they have improved our ability to explain and predict individual behaviour relevant to core policy problems.
People are often not good at knowing what to choose. We have limited attention and can only process and respond to a limited set of stimuli. We have limited computational capacity and often try to avoid difficult choices and use mental accounting and other “shortcuts” to simplify choices. We often use biased reasoning when thinking about probabilistic events and are prone to over-confidence and implicit bias. Interventions can help simplify choices, focus attention, provide reminders, and improve anchors. Specific issues covered include:
- Cognitive limits – we forget things and delay decisions
- Anchoring – we use any available number as guide to choice
- Mental accounting – we assign money for different purposes
- Implicit bias – we allow irrelevant characteristics to affect choice
People are often not good at implementing their choices. We often confront a large gap between our intentions and our actions. We give in to temptation and often do things we wanted to avoid, especially when in heightened emotional states. Interventions, including commitment mechanisms, can help align actions with intentions. Specific issues covered include:
- Present bias – we underweight the future in favor of present
- Self-control – we are tempted to make choices we know are bad for us
- Habit – we automatically repeat actions without thinking
People have preferences that are “reference dependent” and “other regarding.” We care about changes in status (not end states) and are especially averse to experiencing losses. We also tend to prefer fairness, in general and conformity with social norms and maintaining social identities associated with gender, age, and ethnicity. Specific issues covered include:
- Loss aversion – we care more about potential losses than gains
- Framing – we often base choice on the language used to describe options
- Social norms – we care about fitting in with others
Sponsored by Folk
Day 2 - Tuesday 20th November, 2018
The insights from behavioural economics allow us to more accurately diagnose the sources of problems people have making good decisions — decisions that align their best intentions with their actions — and we can then design interventions to help people overcome these problems and make better choices for themselves. Behavioural interventions can complement the traditional policy levers (e.g., taxes, subsidies) and include a wide range of features of the “choice architecture” such as the setting of defaults and menus, automatic enrolments, error-forgiving safeguards, simplification and framing of choices, personalisation, salience cues, reminders, checklists, planning prompts, commitment devices, and peer comparisons and feedback. The key topics covered include:
- Diagnosis of behavioural issues
- Human-friendly design principles
- Conducting field trials to assess what works
Behavioural insights have now been applied by governments to improve policy design across a range of issues in many countries. We will closely examine a variety of behavioural interventions and the evidence on whether they have been effective. Case studies will include a selection of nudges addressing the following (chosen by the group):
- Health – smoking cessation, immunisation, prescriptions of antibiotics, organ donation
- Finance – retirement savings, consumer credit
- Welfare – claiming of benefits, compliance with eligibility requirements
- Education – school attendance and performance, college application
- Environment – household energy consumption, pollution
- Taxes – payment of overdue taxes, accurate filing of returns
- Crime – participation in youth gangs, domestic violence
In the final session of the forum, attendees will be asked to work in small teams to tackle important policy problems they are passionate about by applying the lessons learned in previous sessions. Each team will choose and define a problem, diagnose the critical behavioural issues, and design one or more behavioural interventions aimed at addressing these issues and improving outcomes.
Department of Government, Harvard University
Michael J. Hiscox is the Clarence Dillon Professor of International Affairs in the Department of Government, Harvard University. At Harvard, he is the Director of the Sustainability, Transparency, Accountability Research (STAR) Lab and a member of the Behavioural Insights Group at Harvard’s Center for Public Leadership. He is also a faculty associate at the Institute for Quantitative Social Science, the Weatherhead Center for International Affairs, and the Harvard University Center for the Environment.
While on leave from Harvard between 2015 and 2017, Professor Hiscox was the founding Director of the Behavioural Economics Team (BETA) in the Department of the Prime Minister and Cabinet, Australian Government. He continues to serve as an adviser to BETA. Professor Hiscox has written two books and numerous articles for leading scholarly journals. Working with governments, non-profit organisations, and corporations, he has designed and implemented randomised trials to evaluate a wide range of government policies, company initiatives, and programs administered by non-profit organisations in the United States, Australia, Singapore, Indonesia, Ghana, Nigeria, and Cote d’Ivoire.
Professor Hiscox received his Bachelor of Economics (First Class) from the University of Sydney in 1989 and his PhD in Government from Harvard University in 1997.