Summary
Key findings in behavioral economics are that people’s behavior (revealed preferences) is often not in line with their intentions (normative preferences), that they are sensitive to the way choices are presented to them, and that their cognitive abilities are limited. This is manifest in particular in areas of intertemporal choice, like personal finance and health-related behavior. Policy makers can develop policies that help citizens to make choices that are more in line with their normative preferences. In this paper we summarize the behavioral evidence, discuss the motivations for interventions, and show how recent behavioral insights can help to improve upon existing policies. These new policies could be described as libertarian paternalism, and include setting defaults thoughtfully and using unorthodox commitment mechanisms.
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Acknowledgment
The authors thank Alwin Oerlemans, Rick van der Ploeg, Jan Potters, Marno Verbeek, Gerard de Vries, Joel van der Weele, and two anonymous referees for helpful comments on earlier versions of this paper. Netspar provided financial support.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Kooreman, P., Prast, H. What Does Behavioral Economics Mean for Policy? Challenges to Savings and Health Policies in the Netherlands. De Economist 158, 101–122 (2010). https://doi.org/10.1007/s10645-010-9141-6
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DOI: https://doi.org/10.1007/s10645-010-9141-6