The Australian government will start using behavioural economics in its policy-making

The Australian federal government will soon design policies with the assistance of a behavioural economics team, communications minister Mitch Fifield announced today.

Behavioural economics is a new field of economics that recognises that humans often do not make purely rational decisions. It studies the psychological, cognitive and environmental influences on decision making.

An example would be the move to “opt out” rather than “opt in” system for organ donation. Even though the decision is the same, asking the population to “opt out” of donating organs rather than opt in has repeatedly shown to increase the rates of organ donation.

Several governments have already created such teams, including New South Wales, the United States and the United Kingdom.

The new team will be established within the Department of Prime Minister and Cabinet.

Addressing a public policy conference today, Senator Fifield noted that the ATO and a couple of other federal departments had started to use behavioural economics already.

“Tailored text messages sent to their phones have helped taxpayers avoid going into debt, and plain English debt letters, using social norms, have led to more people responding and paying on time,” Fifield said.

“However, while these tools help us to understand the world as it is, they do not on their own automatically provide the political or public justification for using these tools to change policy, or seek to alter human behaviour. The challenge of generating public and stakeholder consent for policy change remains; it cannot be assumed.”

You can read more at The Mandarin.

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