Behavioural economics: seven principles for policy-makers

Behavioural economics: seven principles for policy-makers
Document type
Dawnay, Emma; Shah, Hetan
New Economics Foundation
Date of publication
1 July 2005
Trends: economic, social and technology trends affecting business
Business and management
Material type

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The aim of this briefing is primarily to assist policy-makers who use economic tools, by providing a summary of the latest thinking in behavioural economics and a theoretical underpinning for many policy approaches that have, up to now, been used intuitively. The standard (neoclassical) economic analysis assumes that humans are rational and behave in a way to maximise their individual self-interest. Whilst this ‘rational man’ assumption yields a powerful tool for analysis, it has many shortfalls that can lead to unrealistic economic analysis and policy-making. This Briefing distills many concepts from behavioural economics and psychology down to seven key principles, which highlight the main shortfalls in the neoclassical model of human behaviour.

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