Behavioural economics and the related fields of cognitive and social psychology are now very much in the mainstream, as the highly visible success of the Behavioural Insights Unit in the United Kingdom attests. A robust and diverse range of findings about the limits of human thinking challenges policy practitioners to reconsider how they both design and advise on policies. This challenge is particularly relevant given that the training and background of policy advisors typically does not include these fields, with political science, law and conventional economics much more common.
A range of recent books have popularised many concepts from these fields and are leading an increasing number of people outside academia to revisit the way we conceive of thinking and decision-making. For example, The Wisdom of Crowds (Surowiecki, 2004), Blink (Gladwell, 2005), The Black Swan (Taleb, 2007), Predictably Irrational (Ariely, 2008), Nudge (Thaler and Sunstein, 2008), Thinking Fast and Slow (Kahneman, 2011) and The Signal and the Noise (Silver, 2012) all underline the limitations of rational accounts of thinking and decision-making.
Perhaps reflecting the new public popularity of these fields, it has become fashionable in certain circles to consider ways to incorporate the findings of cognitive psychology and behavioural economics into the design of policies (e.g. Ministry of Economic Development, 2006; Dolan et al., 2010), often under the label libertarian paternalism or choice architecture (Thaler, Sunstein and Balz, 2010). The argument is often that small changes in the design of policies can nudge choices in a desired direction without the need for compulsion. Perhaps the best known example is the design of KiwiSaver, where the default option is automatic enrolment, with people required to opt out instead of opt in.
Tim Hughes studied economics at the University of Auckland and has worked in policy roles at the Department of Corrections and the Ministry of Social Development. He is currently working in the sector investment team at the Ministry of Justice.