People and policy: behavioural economics and its policy implications

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The standard approach of economic modelling and policy analysis is to assume that people are homo economicus: a rational and self-interested economic man. However, a well-documented body of evidence suggests that human decision makers depart from this assumption in several interesting ways. This paper explores three key behavioural aspects – loss aversion; present-biased preferences; and social preferences. It considers the evidence to support them; how behavioural economists have modified economic models to capture the implications of each modification; and how they offer new insights on the scope and efficacy of a wide range of policy interventions.
Original languageEnglish
Pages (from-to)93-106
Number of pages14
JournalFraser of Allander Economic Commentary
Issue number3
Publication statusPublished - 4 Mar 2015


  • behavioural economics
  • loss aversion
  • reference-dependent preferences
  • present-biased preferences
  • social preferences
  • procrastination
  • reciprocity
  • public policy

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