This briefing by Emma Dawnay and Hetan Shah summarizes the latest thinking from behavioural economics. It reflects the New Economics Foundation’s effort to put alternative economics into a form that is useful primarily for policy-makers who use economic tools. It should also be helpful to the broader policy-making community by providing a theoretical underpinning for many policy approaches that have, up to now, been used intuitively. Standard (neoclassical) economic model assumes that humans are rational and behave in a way to maximize their individual self-interest. This approach has many shortfalls that can lead to unrealistic economic analysis and policy-making. This briefing distils many concepts from behavioural economics and psychology down to seven key principles, which highlight the main shortfalls in the neoclassical economics model of human behaviour.
Read the document (720 KiB)
Dawnay, Emma, and Hetan Shah. 2005. Behavioural economics: seven principles for policy makers. London: New Economics Foundation. http://www.neweconomics.org/gen/z_sys_PublicationDetail.aspx?PID=213.