Behavioural Economics and Public Policy
Behavioural economics has revolutionised economics over the last three decades by exposing the limitations of the assumptions of Homo Economicus, and introducing insights from the behavioural sciences. The course aims to provide students with an understanding of the development of behavioural economics and how it builds on traditional theory. It will discuss theoretical advances and the empirical literature.
Throughout the course, references will be made to contemporary public policy issues, and how behavioural economics can help to better understand decision-making behaviour. Students will confront questions such as whether policies incorporating behavioural insights can be used to help people save more or use less energy, and whether individuals’ aversion to losses determines seller behaviour in housing markets.
The course will begin by testing students’ understanding of the traditional models of economics. It will then examine empirical studies that demonstrate departures from the assumptions made in the canonical economic model. The course will proceed to show how such departures have been formalised theoretically, and the extent to which the empirical literature provides support. The use of real-world examples will help to illustrate how insights from behavioural economics can complement the long-standing economic discourse.
The course will expose students to several topics in behavioural economics, for example:
- Judgement under uncertainty
- Reference dependent preferences and loss aversion
- Inter-temporal preferences
- Social preferences
- Status and social comparison
- Role of nudging and impact on consumer behaviour