Is Behavioral Economics A Copout?

Sep 12 2011 @ 8:52am

George Loewenstein raised the specter in an (offline) interview in Money:

British Prime Minister David Cameron is a big fan of behavioral economics and gave a talk in which he said, “The best way to get someone to cut their electricity bill is to show them their own spending, to show them what their neighbors are spending, and then show them what an energy-conscious neighbor is spending.” … It’s a great idea, and leads to reductions in energy use of a few percent, but showing someone their neighbor’s bill is not the best way to get them to cut their own bill. The best way is to charge an amount that reflects the true cost of the electricity, including social costs from importing oil, pollution, climate change, and so on.

Wilkinson applies to logic to politicians:

Behavioral econ offers policymakers an added dimension of evasion. A government can make a big hullabaloo of caring about energy consumption and climate change by sending folks mail detailing in vivid color their energy use relative to social norms instead of making themselves unpopular by making voters poorer. Not only is behavioral economics not some sort of master-key for effective policymaking, it gives politicians a fresh way to appear forward-thinking, activist policymakers while really doing nothing much at all.