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21 May 2012

"Nudging:" a new regulatory technique (A. Alemanno)

Associate Professor of law at HEC Paris and top regulatory expert Alberto Alemanno explains in his op-ed published last week in European Voice why the European Commission should include behavioural insights in the design of regulatory proposals (print copy). (Excerpts): "In recent years, findings in behavioural sciences have highlighted the complex cognitive framework in which people make decisions. In particular, behavioural economics, by refuting the neoclassical assumption of human full rationality, has revealed a set of psychological biases capable of explaining why too often people make choices that seem to go against their best interests... These findings have important implications not only for the well-being of European citizens but also for regulatory policy... Under both US President Barack Obama and UK Prime Minister David Cameron, policymakers have recently been encouraged to draw on behavioural and social-science insights in the design or implementation of new regulations, an approach commonly called ‘nudge'. Inspired by ‘libertarian paternalism', it enables the creation of public policies that steer citizens towards making positive decisions as individuals and for society while preserving individual choice... Besides a few isolated initiatives displaying some behavioural consideration (eg, revision of the tobacco products directive, consumer information regulation, behavioural advertising), the EU has not yet shown a commitment to integrating behavioural research into its policymaking. Given the potential of this regulatory approach to produce effective, low-cost and choice-preserving policies, this seems inadequate, especially given the EU's commitment to smart regulation, a commitment stated in its Europe 2020 Strategy."
Other sources on nudging include Cass Sunstein's book written with R. Thaler "Nudge." For more news on the concept and technique, see the Nudge blog.

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