Government social research – Behaviour Change Review

January 15, 2011

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GOVERNMENT SOCIAL RESEARCH BEHAVIOUR CHANGE KNOWLEDGE REVIEW – Reference Report: An overview of behaviour change models and their uses

“Behavioural economics provides numerous principles combining economic and psychological theory, all of which serve as qualifications to rational choice theory. These principles have been summarised in a review for policy audiences by the New Economics Foundation (Dawnay and Shah 2005). Some of the most widely applied principles are:

Hyperbolic Discounting
In prospective decision making, people tend to offset long-term benefits against short- term rewards; this calculation results in a discount rate. Different people apply different discount rates (eg. those in disadvantaged groups tend to have high discount rates, showing a greater preference for short-term rewards – see Halpern et al 2003), while an individual’s discount rates vary according to the behavioural decision in question (eg. different products attract different rates; airconditioning is commonly highly discounted – Wilson and Dowlatabadi 2007). Such considerations mean that the rates applied vary across the timeframe of the decision (hence they are ‘hyperbolic’), with the result that people’s preferences appear inconstant. However, it is not clear that this always contradicts rational choice. For example, it may appear that people are irrational in not providing sufficiently for their own pensions, but life expectancy is uncertain, investments are uncertain, health is uncertain and people may simply prefer to consume when younger even as they wish they had more for their old age. (For more information on discounting, see HMT 2003.)

Framing
The decision made by an individual depends on how the available choices (the ‘reference frame’) are presented to them. Framing the same choice in terms of losses instead of gains can alter the decision made, as can presenting the items in a different order (see Talbot et al 2007, Harford 2008).

Inertia
When faced with a difficult decision or one involving too much choice, people may choose not to change their behaviour at all, or to choose the easiest option (the path of least resistance). This principle is often in evidence in financial decisions (such as investments, or changing energy supplier – see Talbot et al 2007, Wilson and Dowlatabadi 2007).

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