Earlier this year Raj Chetty gave the keynote address at the annual AEA meeting. He discussed the role of behavioural economics for public policy, giving examples of successful nudges such as a change in defaults for retirement saving. Unusually, he took the goal of policy as given and spent his lecture talking about how behavioural economics can help achieve those goals. Read more
There were a bunch of excellent comments on yesterday’s food post. I thought I could answer them by adding a bit of clarity here.
After reading both the Stuff article and the initial article on Gareth Morgan’s blog and the follow up, I am convinced both Gareth and Geoff Simmons (GG) have inadvertently become extreme social constructivists – but may not realise it yet.
Now I hate it when people just whip out rhetoric like “social constructivist” and don’t explain it – so what do I mean, how have they gone this way, and what do we know about this type of framework so we can analyse it?
As the world starts to move from focusing on growth to wellbeing a group of neuroscientists decided to test people’s brains to check whether ‘happiness’ occurred as predicted. The BBC reports that they found
“We can look at past decisions and outcomes and predict exactly how happy you will say you are at any point in time,” said lead author Dr Robb Rutledge from University College London.
The experiment tested decisions under uncertainty, which is a well-researched topic in economics. The best model we have at the moment derives from Kahneman and Tversky’s development of prospect theory. Read more
…assuming that decision processes are reducible to one-size-fits-all sets of axioms has not and will not produce a descriptively adequate account of human behaviour under risk and uncertainty.
Researchers find that people’s risk preferences are not stable. How risk averse is an individual? That depends on the situation.
The money quote:
They found that the biggest impact of a minimum price policy was on “harmful” drinkers in the lowest income quintile (7.6% reduction in alcohol), whereas the impact on harmful drinkers in the highest income quintile was modest (1%). Consumption fell by 1.6% among “responsible” drinkers in the lowest income quintile. That is, the impact is concentrated among low-income harmful drinkers.
Moreover, this Lancet paper found that “Individuals in the lowest socioeconomic group (living in routine or manual worker households and comprising 41·7% of the sample population) would accrue 81·8% of reductions in premature deaths and 87·1% of gains in terms of quality-adjusted life-years.” In the public health field, we seldom see policy packages that have such a notable impact on reducing health inequalities. [** Further comment at end].
The gains come from putting a minimum price of alcohol that prices the poor out from consumption. Consumption that has a benefit – something that is ignored constantly.