• Identify, analyse and evaluate key psychological theories and observations pertaining economic and political decision making.
• Relate different concepts of rationality and biases to preference formation.
• Assess the role of different methods suitable for identifying biases, heuristics, and individual choice motivations.
• Identify and evaluate policy interventions resting on different insights drawn from behavioural economics.
• Construct and extend coherent arguments building on behavioural insights with implications for policy design.

This course focuses on understanding economic behaviour through the psychology of decision-making and how this framework informs public policy. We start by reviewing classic economic theories of rational behavior and identify the limitations of their behavioral predictions. We then introduce various individual cognitive limitations, heuristics, social influences, and non-monetary incentives as explanations for the previously indentified limitations. Through these steps we will try to better understand individual motivations across many different economic decisions, from consumer behaviour to social and political interactions. Next, we will discuss how these behavioural insights could or should inform public policy especially through the use of nudges and what methodological and ethical concerns arise when the aim is to influence individual behaviour. 

In relation to Nordic Nine

This course focuses on understanding public policy relevant social and economic behaviors through the psychology of decision-making. The course equips students with a plethora of transformative capabilities in accordance with the Nordic Nine. The concentration on behaviorally informed policy alternatives requires a data driven framework and the success or failure of these policies requires systematic incorporation and interpretation of ambiguity (NN2). In conjunction with this capability, the course relies heavily on previous methodological training received by students and forces them, with designated sessions for the most used methodologies with BEPP, to re-learn those methods, apply them in specific areas, and discuss these with others (NN8). Both of these areas also present serious ethical challenges pertaining to transparency, long- and short term benefits, or potential inequalities or back-fire effects, presenting students with fundamental ethical dilemmas (NN5). Furthermore, student capabilities regarding the production of prosperity and protection of the prosperity of next generations (NN7) are fostered through sections of the course that are dedicated to green policies and green nudges, but also issues of temporal discounting. In tandem, these two core aspects can enhance policy design or compliance and ultimately safeguard responsible policy making and promote temporally responsible choices. The course fosters in-class group work and relies on peer-discussions in class, but also expects students to prepare at least one individual activity that engages critically with a topic provided. Overall, the course creates an environment conducive of being "you are critical when thinking and constructive when collaborating" (NN6). Finally, given that behaviorally informed policies create the context in which businesses operate, the course indirectly relates to NN1 and NN3.

This course is closely related to: NN2, NN5, NN6, NN7, NN8

This course partially speaks to:   NN1, NN3

Sample reading materials:

Thaler, R. H. (2018). From Cashews to Nudges: The Evolution of Behavioral Economics. American Economic Review, 108(6), 1265–1287

Kamenica, E. (2012). Behavioral Economics and Psychology of Incentives. Annual Review of Economics, 4(1), 427–452

Weibel, A., Rost, K., & Osterloh, M. (2010). Pay for Performance in the Public Sector: Benefits and (Hidden) Costs. Journal of Public Administration Research and Theory, 20(2), 387–412

DellaVigna, S., & Linos, E. (2020). RCTs to Scale: Comprehensive Evidence from Two Nudge Units (tech. rep.). Working Paper, UC Berkeley

John, P., & Blume, T. (2018). How Best to Nudge Taxpayers? The Impact of Message Simplification and Sescriptive Social Norms on Payment Rates in a Central London Local Authority. Journal of Behavioral Public Administration, 1(1)