Behavioural economics and public policy

Roundtable proceedings

The Productivity Commission convened a roundtable on the topic Behavioural Economics and Public Policy at the Sofitel, Melbourne on 8 and 9 August 2007. The invitees included senior government officials, academics, consultants, journalists and representatives from consumer groups. Keynote presentations were given by Professor Eldar Shafir from Princeton University and Professor Bruno Frey from Zurich University.

The roundtable examined the policy implications of behavioural economics - a relatively new field that applies insights from psychology to economic issues and analysis. Participants discussed the contribution that behavioural economics can make to a broader understanding of people's motivation and behaviour in markets and the implications for policy and regulatory approaches. Behavioural economics has particular relevance to consumer policy, and insights gained through the roundtable made a useful contribution to the Commission’s inquiry on Australia's consumer policy framework.

As with the Commission's previous major conferences, the proceedings are being published to enable a wider audience access to the information and insights that emerged. This volume includes papers by the speakers and the responses of the discussants. For each session, there is also a summary of the key points covered in the discussion.

The Commission is grateful to the speakers, discussants, participants and others whose contributions made the roundtable such a valuable exercise.

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Media release
Contents

The Productivity Commission hosted a Roundtable on the topic Behavioural Economics and Public Policy in Melbourne on 8 and 9 August 2007.

Public policy is often influenced by a presumption that individuals act rationally in their own best interests. This is clearly not always the case. People act intuitively and can make mistakes that they later regret. And many make sacrifices for the benefit of others. Behavioural economics merges psychology, economics and other disciplines to try to understand the way we actually behave in the market place.

The Commission's roundtable explored the application of behavioural economics to public policy development and addressed two main questions:

how do behavioural economic insights help policy makers achieve given policy goals more effectively
can the findings of behavioural economics be used to support or justify a particular policy goal.

Invitees to the Roundtable included eminent international experts in this field, as well as senior officials, business and consumer representatives, policy analysts and commentators. Speakers' papers are now available (see over) and the proceedings - which will also include summaries of the session discussions - will be published by the Commission later this year.

Further information

02 6240 3330 / media@pc.gov.au

Foreword

1 Introduction - Gary Banks

Part A Introduction to the issues

2 A behavioural background for economic policy- Eldar Shafir

Discussant: Paul Frijters

General discussion

Part B Motivation and behaviour

3 Motivation crowding theory — a new approach to behaviour - Bruno S. Frey

Discussant: Mark Harrison

General discussion

Part C Behavioural economics and consumer policy

4 Behavioural economics and the Federal Trade Commission - Joseph P. Mulholland

5 Having one's cake and eating it too — an analysis of behavioural economics from a consumer policy perspective - Chris Field

Discussant: Louise Sylvan

Discussant: Henry Ergas

General discussion

Part D Reflections for public policy

6 Behavioural economics and public policy- Geoffrey Brennan

Panel discussion

Dinner address- Ross Gittins

Appendices

A Roundtable program
B Roundtable participants

References