Nudging in the City of London - Taking behavioural economics to the Square Mile

Stephen Young gave a talk this month at an event hosted by Investec Wealth and Investment for Independent Financial Advisors (IFAs). For many commentators, and those present in the splendid surroundings of The Ned, formerly the Midland Bank HQ, autumn 2018 is significant as the 10th anniversary of the Global Financial Crisis. But 2018 is also the tenth anniversary of the publication of Nudge, the breakthrough book that propelled behavioural economics to global recognition by policy makers and regulators. All the more ironic, considering that Richard Thaler has recently commented that it was a struggle to find a trade publisher for Nudge, which he co-authored with Cass Sunstein. 

Despite its relatively recent prominence, the talk on ‘The Rise and Rise of Behavioural Economics’ (edited version of slides here) started with the surprisingly long evolution of behavioural economics - beginning in the 18th century and came bang up to date with Daniel Kahneman and Richard Thaler - although both have won the Nobel Prize for economics, only one, Thaler, who won in 2017, is actually an economist.

The talk covered the big ideas of the main thinkers before looking at how these ideas are now being used to understand consumers’ financial decision making, showing that complexity, biases and cognitive errors can lead to flawed decisions. The result of financial decision-making being biased and error-prone is that governments and regulators are more likely to intervene in choice behaviour, to increase the likelihood that consumers will make better decisions.

The conclusions showed how regulators, including the UK’s Financial Conduct Authority, are increasingly using insights from behavioural economics to understand what leads people into flawed decisions, and how to avoid them. The result is financial regulation that more accurately reflects how people actually behave rather than the sometimes unrealistic assumptions of standard economics.

Behavioural economics has become mainstreamed, and is informing policy-making and regulation in the UK and around the world. It’s already affecting the UK financial services sector – expect to see more of it.

As an aside, Stephen enjoyed meeting, and being introduced by the BBC’s Nick Robinson, who went on to share his perspective on the politics of Brexit. No surprises....it’s complicated! So pleasing to find out that Nick is a fan of behavioural economics.

New Module in Brighton and Sussex Medical School: The Economics of Healthcare and Health-Related Behaviour

Stephen Young (that's me!) is looking forward to teaching on the new one week module at Brighton and Sussex Medical School aimed at health care professionals, managers, commissioners and leaders actively involved in, or with an interest in financial and economic aspects of health care in the public, private or voluntary sectors. The module, which starts on Monday 5th February 2018, is delivered on five consecutive days, each of which presents a theme in health economics and health behaviour.

As well as putting health economics in a theoretical framework to help healthcare professionals, healthcare decision-makers, or policy makers make choices on how to decide the best use of limited health resources, the module will also consider the scope for market and demand management by showing how behavioural economics and social marketing can help modify the behaviours which contribute to many health problems. 

This module will consider the challenges facing the healthcare sector using economic concepts such as supply, demand and the market to understand resource allocation. These concepts are then applied to the provision of healthcare services and the promotion of good health. The module considers the advantages and disadvantages of different approaches to financing and organizing health services. 

Students are introduced to the main methods of economic evaluation (cost-effectiveness and cost-benefit analysis) and shown how they apply to decision-making in healthcare. We will then spend a day each on social marketing and behavioural economics, before moving on to the final day, an interactive session when students will select a key issue or problem and apply the concepts, theory and tools presented in the module to analyse the problem and critically evaluate possible solutions.

More details of the module (code MDM173) are available from the Module Administrator, Charlotte Hill (C.hill@bsms.ac.uk) Telephone:  01273 644128