How can you improve economic policies with behavioral experiments?

1 What are behavioral experiments?

Behavioral experiments are methods of collecting data and testing hypotheses about human behavior in controlled or natural settings. They can involve manipulating variables, such as prices, information, or framing, and measuring the effects on outcomes, such as choices, preferences, or actions. Behavioral experiments can be conducted in the lab, where participants are randomly assigned to different conditions, or in the field, where existing or new policies are implemented and evaluated.

2 Why use behavioral experiments for economic policies?

Behavioral experiments can help improve economic policies in several ways. First, they can provide evidence-based insights into how people actually behave, and why they behave that way, in different contexts and situations. This can help design more effective and efficient policies that account for human psychology and behavior. Second, they can help test and compare different policy options and interventions, and measure their impact on relevant outcomes and indicators. This can help select the best policy alternative and optimize its implementation. Third, they can help monitor and evaluate the performance and impact of existing or new policies, and identify any unintended consequences or side effects. This can help adjust and improve policies over time and ensure accountability and transparency.

3 How to design behavioral experiments for economic policies?

Designing behavioral experiments for economic policies requires careful planning and execution. To start, you must define the research question and policy objective. It is also important to review existing literature and evidence, as well as develop a hypothesis and intervention. Additionally, you should select an experimental method and setting, sample and randomization, as well as collect and analyze data. Lastly, it is essential to interpret and communicate the results to stakeholders and policymakers.

4 What are some examples of behavioral experiments for economic policies?

Behavioral experiments have been used for various economic policies and domains, such as taxation, education, health, environment, and social welfare. For instance, a field experiment in Guatemala tested the effect of different messages on tax invoices on taxpayers' willingness to pay. The results showed that the gratitude message increased tax payments by 43%, while the other messages had no significant effect. In India, a field experiment tested the effect of providing information and feedback to parents on their children's academic performance and attendance. The results showed that both methods increased parental involvement and awareness, but only the report cards improved student outcomes. A lab experiment in the UK tested the effect of different labels on food products on consumers' choices and calorie intake. The results revealed that the physical activity equivalents reduced calorie intake by 65%, while the other labels had no significant effect. Additionally, a field experiment in Switzerland tested the effect of different interventions on household energy consumption. The results showed that feedback and social comparison reduced energy consumption by 5.7% and 6%, respectively, while goal setting and monetary incentives had no significant effect. Lastly, a field experiment in Kenya tested the effect of providing unconditional cash transfers to poor households on their economic and social outcomes. The cash transfers were delivered through mobile phones and varied in size and frequency; they resulted in increased consumption, assets, income, health, education, and psychological well-being.

5 What are some benefits and challenges of behavioral experiments for economic policies?

Behavioral experiments for economic policies can provide causal evidence and rigorous evaluation of policy interventions and outcomes, as well as generate novel insights and innovative solutions for complex and persistent problems. Additionally, they can help improve policy design and implementation by accounting for human behavior and psychology, while also enhancing policy learning and adaptation through experimentation and feedback. However, such experiments can be costly and time-consuming to conduct and scale up, as well as subject to ethical and legal issues such as informed consent, privacy, and fairness. Furthermore, they are influenced by contextual and situational factors such as culture, norms, and expectations; in addition to being limited by external validity and generalizability like the representativeness of the sample and the transferability of the results.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?