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.

Nudging the way to better food choices: Brighton and Hove in 2024?

The latest Annual Report of the Director of Public Health NHS Brighton & Hove City Council, which has just been published, has taken an innovative approach to its subject by projecting the story 10 years into the future. The report describes the population demographics, morbidity and mortality, lifestyle, behaviour, education, social and healthcare systems, housing and major project completions as they could be in Brighton and Hove in 2024. Whilst it may be conjectural, the report is based on evidence from the Office of National Statistics population estimates, published literature on developments in health and social care and extrapolation of data from past trends to 10 years hence.

The author of the report is Dr Tom Scanlon, Director of Public Health, Brighton & Hove City Council, with sections written by members of the public health team. The report looks at demographic trends and lifestyles, including an epidemic of obesity – plus education, housing, mental health, transport, and the economy: all factors which will affect public health.

The section of the report on obesity reflects Public Health England’s recommendations on food availability in schools, colleges, leisure centres and other places where children gather and notes that “in 2018 the last vending machine was finally removed from the city’s education establishments, and a year later from the city’s sports venues and leisure centres.” On page 24, the following appears,

“The Healthy Partners Award scheme, now in its seventh year means that over 300 of Brighton & Hove’s cafes and restaurants now routinely offer ‘Me Size’ plates – proportionately sized and priced to help families make healthy choices. The city’s annual ‘Nudge’ competition regularly rewards schools, leisure centres, cafes, bars and restaurants for innovative design, lay-out and incentives to promote healthy eating.”

Cass Sunstein and Richard Thaler (authors of ‘Nudge’) - Brighton and Hove salutes you!