- Decision-makers are fallible; their behaviour varies and is subject to cognitive biases
- Better results can be achieved by accounting more accurately for how humans actually behave
- Behavioural insights teams need the organisational ability to test the proposed impact
What is ‘behavioural insights’?
In standard economic models, decision-makers use information in an unbiased way. They deliberate carefully about all the available choices and their possible consequences. They are assumed to be completely rational. In reality, human beings make decisions imperfectly.
Decision-makers are fallible; their behaviour varies across time and space, and it is subject to cognitive biases, emotions and social influences. We are frequently more altruistic, less objective and more error-prone than economists would like. Decisions are the result of less deliberative, linear and controlled processe than they would care to believe. We are, in fact, thoroughly human. While this may sound obvious, it has not been applied to the field of economics – until now.
What skills are required to use behavioural insights?
- Understanding of biases and fallacies: A comprehensive understanding of behavioural economic theory is necessary to create the hypotheses and interventions to be tested
- Human-centred design thinking: Creating interventions that operationalise a testable hypothesis about human behaviour requires design skills
- Experimentation design and analysis: Each behavioural intervention must be piloted and then measured against a control group. This requires the ability for government to run statistical analysis and have a mechanism to treat two groups differently
Why should policymakers care?
The standard assumptions about human behaviour that are embedded in economic models tend to be over-simplified. Better results can be achieved by accounting more accurately for how humans actually behave, as well as understanding why they behave in this way. These include the tactical – such as tailoring government forms to make them more effective – and also strategic policy design – for example, using carrots instead of sticks to create the desired behaviour. Behavioural interventions such as setting default choices deliberately, which change the salience of information, are examples of behaviourally-motivated interventions.
The literature on behavioural interventions can only help generate hypotheses for what may work in any specific case. This is why behavioural insights teams need the organisational ability to test the impact of proposed interventions in a structured way. Only after testing, using Randomised Control Trials or other methods, can policymakers reach an evidence-based decision.
As behavioural economics is a new discipline, the legitimacy of using such interventions for public policy goals is still being debated. The question whether a particular intervention is appropriate needs to be decided on a case-by-case basis.
Where to next for behavioural insights?
- Mainstreaming the use of evidence. The behavioural insights movement has championed the greater use of evidence in policymaking. That the majority of new policies remain untestable, even post hoc, shows just how far the broader policymaking community has to travel on this dimension.
- Shifting focus to prevention. This is in stark contrast to the majority of social policies and public services, which focus on picking up the pieces when things go wrong, despite the fact that prevention is invariably cheaper and preferable for all concerned.
- Using a human-centred approach. Too often the debate around public service reform can be framed in terms of macro-level systems and structures, such as the creation of new organisations or the introduction of market mechanisms. Such thinking diminishes the importance of human relationships and behaviours – which, after all, lie at the heart of all public service.