Book Review: The origins of behavioural public policy

• Published date: 01 July 2019
• Author: Sita Nataraj Slavov
• Date: 01 July 2019
• DOI: 10.1177/0275074018797200
• Subject Matter: Book Review

American Review of Public Administration

2019, Vol. 49(5) 629 –630

© The Author(s) 2018

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Book Review

The year 2008 saw the peak of the financial crisis, as well as

the release of Cass Sunstein and Richard Thaler’s popular

press book, Nudge. These two events—argues Adam Oliver

in The Origins of Behavioral Public Policy—helped to thrust

behavioral economics into the policy spotlight. Economists

have traditionally held a deep respect for individuals’ prefer-

ences and argued that governments should intervene in per-

sonal choices only when those choices harm others—that is,

when there are externalities. In contrast, behavioral econom-

ics—whose intellectual history Oliver traces to the 1950s—

suggests that if people aren’t making rational choices, then

governments may be able to step in and protect them from

so-called “internalities” or harm they do to themselves.

Along these lines, Sunstein and Thaler advocated for

“nudges,” or behavioral-economics inspired policy interven-

tions that induce individuals to make better choices while

still preserving freedom. In the United States, a nudge that is

growing in popularity is automatic enrollment in retirement

plans. Concurrently, more intrusive behavioral economics-

influenced proposals such as taxes or bans on unhealthy food

or drink—policies that Oliver refers to as “shoves”—have

been discussed and sometimes adopted.

The key contribution of Oliver’s book is to bring some

intellectual rigor to this policy movement, whose initiatives

the author feels have been undertaken “in a sort of haphazard

way” (p. 164). Neither an academic text nor a popular press

book like Nudge, Oliver’s work covers the origins of both

rational choice and behavioral economics models, as well as

their policy implications, grounding each research finding

and policy implication firmly in both the history of thought

and current research. It provides a framework for thinking

about behavioral economics-inspired policy interventions. It

is intellectually thorough, while remaining accessible to

noneconomists.

Oliver begins with the origins of expected utility theory,

the rational choice approach to decision making under uncer-

tainty that underlies many economic models. Walking the

reader through the history of economic thought, he builds up

to a presentation of the key assumptions and predictions of

the standard model. Explanations are presented intuitively,

with a minimal amount of math. Oliver then covers the large

body of empirical evidence that appears to be at odds with

expected utility theory, as well as alternative theories that

may be more consistent with this evidence. For example,

individuals appear to treat gains and losses (relative to a ref-

erence point) asymmetrically, and to overweight small prob-

abilities and underweight large ones.

Oliver next turns his attention to three specific aspects

of economic modeling that have faced strong challenges.

The first is the theory of intertemporal choice, which aims

to describe how individuals make decisions whose costs

and benefits occur at different points in time (such as sav-

ing for retirement). The standard rational choice model is

inconsistent with many empirical findings; for example, it

cannot explain why many people fail to plan optimally for

retirement or stick to diets. These empirical phenomena

are more consistent with an alternative model in which

individuals place additional weight on the present moment

(“present bias”).

The second is how to evaluate individuals’ well-being.

Economic models generally assume individuals make

choices that maximize their utility, which is defined as the

sum of the subjective, instantaneous payoffs they get in each

moment. When used purely for prediction, utility maximiza-

tion need not be taken literally. But the concept of utility is

often used to evaluate individuals’ well-being under alterna-

tive policies and to inform policy decisions, such as whether

a health care intervention passes a cost-benefit analysis. Yet

empirical evidence suggests the overall value individuals

attach to an experience is different from an aggregation of

moment-to-moment utility obtained during the experience.

For example, they attach additional importance to the peak

and end of an experience, and they prefer experiences that

improve over time to those that deteriorate over time. How

much weight should policy makers attach to these evalua-

tions versus the aggregations of moment-to-moment utility?

That remains an open question.

Finally, Oliver considers the role of financial incentives in

motivation. In traditional economic theory, increasing the

financial rewards for an action makes individuals more

797200ARPXXX10.1177/0275074018797200The American Review of Public AdministrationBook Review

book-review2018

Book Review

Oliver, A. (2017). The origins of behavioural public policy. Cambridge, UK: Cambridge University Press. 195 pp. $21. ISBN 9781316510261.

Reviewed by: Sita Nataraj Slavov, George Mason University, Arlington, VA, USA

DOI: 10.1177/0275074018797200