Behavioral economics has emerged as a major driver of regulatory policy around the world in the past five years. Regulatory Policy and Behavioural Economics, authored by Pete Lunn, explores more than 60 examples of how behavioral science has been explicitly used to design and deliver better regulations. While pensions, tax and consumer protection in financial services and health insurance markets are the more common areas for the application of behavioral economics, public health, employment, energy conservation and charitable giving have also been successfully addressed.
1. Consumer choices are influenced by how simply the information and range of options are presented to people, though the evidence of their effectiveness is mixed. "Much more work empirical work is needed to understand when and how the simplification of information improves decisions" (p.44).
2. People tend to choose the more convenient options, especially when they are the default ones ('nudges'). This approach seems especially relevant when immediate costs have to be considered against long-term gains - pension or retirement policies being a popular focus.
3. The importance of the attributes of choices can affect how they are weighed in consumer decision-making. Modifying these choice attributes can be applied to official warnings and advice, but also point to the need to guard against companies who downplay costs and relevant information through providing adequate regulatory guidelines for disclosure.
"It is much easier to identify behavioural problems and to devise potential solutions than it is to judge or to measure the associated impacts." Indeed, one of the conclusions of this work is the need for better research and to generate evidence for effectiveness in the specific context in which the regulations are implemented.
It is reassuring, though not explicitly stated as a social marketing precept, that the secret to the sauce of behavioral economics is in designing and delivering regulations that are relevant to consumers - not the policy makers and special interests. Mandating or supplying information that simplifies consumer decision-making, makes better options more convenient, and increases the salience of key information are goals many of us in social marketing are also working towards achieving.