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Commissioner for Consumer Policy
Applying Behavioural Insights to Policy-Making: Results, Promises and Limitations
Behavioural Economics Conference/Brussels
30 September 2013
Good morning ladies and gentlemen,
I am very pleased to join you today at this conference on the use of behavioural insights in policy making.
This is the 3rd behavioural economics conference organised by the European Commission. In the past, we focused mainly on raising awareness of this subject. Today we are going for a more 'hands-on' approach: we will look at how behavioural evidence can be integrated into the policy-making process on the ground.
Policymakers today need behavioural insight in order to respond to the challenges brought by the profound changes in modern markets.
Market liberalisation has multiplied the number of service providers we can choose from.
Tariff schemes, for example, have mushroomed: in the UK alone, there are currently 13 million mobile phone deals on offer. It becomes increasingly a challenge to identify the best package for one's own consumption pattern.
Services have become much more complex. Consider, for example, the number of individual decisions you take every time you book an airline ticket.
And distance is no longer the barrier it was: where we used to shop locally, any purchase, from anywhere in the world, is now just a click away.
There are also many consumer safety aspects to consider which we, as policymakers, need to pay the utmost attention to.
And, finally, new regulations may, in some cases, have made things even more complex. Whilst they ensure consumers receive more information on the products they buy, such information can only be useful if it is simple, relevant and comparative. Notable examples are the new information requirements for energy labelling, car CO2-labelling and food labelling.
Today, increasingly consumers are expected to digest and use a huge amount of information, all of it in the face of commercial, advertising and pricing strategies that may confuse and overwhelm them.
So, where and how do behavioural insights come into play in such a consumer landscape?
Behavioural science studies how people really behave.
The recent behavioural literature has identified a number of factors which appear to show that people do not always act rationally. For example:
Such evidence is of key importance for policymakers.
Unleashing consumer power implies taking biases identified by researchers into account, not ignoring them.
As Commissioner for consumers, I attach particular importance to building a healthy and competitive environment in which consumers feel confident and empowered to choose the products they need. And a healthy competitive environment is one where every consumer has a chance to get the most out of the market.
Behavioural tools play a pivotal role in delivering smarter regulation. That is, regulation that achieves public policy goals more effectively but which also reduces businesses' administrative costs.
Believing that behavioural science can improve our policies is not just a hopeful expectation. Regulatory bodies across the world have already started applying behavioural insights in policymaking:
The European Commission can already note success in using behavioural insights for policy solutions:
Ladies and Gentlemen,
Behavioural studies have become an essential element of any policy which seeks to promote and protect the consumer.
Of course, such an innovative approach implies a change in policymakers' mindset. Testing remedies via the filter of behavioural economics should prevent the adoption of ineffective policies and it should hopefully ensure the best possible outcome.
Behavioural economics is not biased towards more regulation or less regulation. If anything, it is biased towards more effective regulation and enforcement. In this sense, it is very likely to constitute a win-win solution, one that protects consumers while avoiding any unnecessary burden for firms. What I hope today's event will provide is the opportunity for a fruitful debate on the possibilities and limitations of using behavioural techniques in policy making, and their potential to address current and future challenges.
I look forward to, and I wish you, a stimulating conference, the results of which will feed into our future work.