Policy Brief
Lessons from Behavioural Economics for Policy-Making

This policy brief examines the impact behavioral economics could have on development policy. In the last two decades, questioning of the economics textbook model of individual choice behavior has accelerated. It has become clear that the cost of assuming 100 per cent rationality has exceeded the benefits in many applications of economic theory. Policy design principles based on insights from psychology and economics could have a major impact on the effectiveness of policy implementation, from tackling under-saving, contract design, the measurement of vulnerability, and political support for redistributive policies both in the global south and north.