Beyond Nudge: The Potential of Behavioural Policy

Melbourne Institute Policy Brief No. 04/15

Date: 2015


Reuben Finighan


Policymakers often mistakenly see behavioural policy as synonymous with "nudging". Yet nudges are only one part of the value of the behavioural revolution—and not even the lion's share. This policy brief looks at the full potential of behavioural policymaking. Using examples in cigarette regulation, retirement savings, and poverty, it makes three arguments:
1. Trade-offs between social welfare and individual freedom of choice affect both nudges and conventional policy tools (like mandates, taxes and transfers). Nudges are not special tools that avoid such trade-offs.
2. Nudges typically sacrifice social welfare in favour of individual choice, and for this reason many well-known nudges will be unattractive in Australia. Some nudges can, however, play a complementary role by fine-tuning conventional policy regimes.
3. Conventional policy tools will continue to be the most powerful tools for countering behavioural biases, and have the most promise for driving major, behaviourally-informed reforms in Australia.
Policymakers should not ask "can we nudge this?", but should instead ask how behavioural evidence changes the way they think about all the options in the policy toolkit.

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