the winter turns particularly cold. This creates a bias as we as
humans are not very good at making predictions and judge-
ments, as we often overestimate the likelihood of events.
6) Social Norms
This is the recognised influence of others on the individual mak-
ing the decision, Individuals are influenced by social prefer-
ences, identities, and norms. Many people imitate the behaviour
of others almost automatically. For example, encouraging pas-
sengers to wear seatbelts and encouraging people to eat healthi-
ly. Social norms do strongly link to economic policy using the
knowledge surrounding behavioural economics to implement
these regulations such as making it law to wear a seatbelt.
7) Altruism and Fairness
This is the bias of altruism and fairness which means that con-
sumers are to do what they see as the morally right thing, even
if this means paying more for a good or a service e.g. fair trade
goods are slightly more expensive but people will pay more for
them as they ensure better living standards of those producing
these goods. This means charity work or donating money is
seen as irrational but consumers do this as they gain a sense of
satisfaction from doing so. Critics of this argue that people do
these things out of fear of being judged for not partaking in such
actions.
Applications of Behavioural Economic Theories
In the UK we have something called the Behavioural Insights
Team – also known as the Nudge Unit. This teams works with
the government to make public services more cost-effective and
easier for citizens to use to improving outcomes of policies by
introducing a more realistic model of human behaviour to policy
and to enable people to make ‘better choices for themselves’.
They do this through various different methods. A few examples
of this is: texting patients reminders of hospital appointments to
reduce the amount of appointments missed, therefore saving
government funds; using field experiments, in order to increase
tax compliance, where they found that deterrence approaches
improve compliance.
Behavioral economics is an emerging field being used by econo-
mists to influence consumers into performing certain actions,
this field is increasingly being used and may be even more fore-
front in the future.
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