Behavioural Economics in Covid-19 Policies
In classrooms up and down the country, economics teachers proclaim the quote, ‘It is not from the benevolence of the butcher, the brewer or the baker that we expect to eat our dinner, but from their regard to their own interest’ (Adam Smith, 1776).
Adam Smith proposes that all human behaviour is motivated by self-interest, rather than altruistic tendencies. This idea would build his theory of an ‘Invisible Hand’, and become a bedrock of the economic discipline.
However, economists would become doubtful of the image Smith paints, that humans are consistently rational beings who make decisions that maximise their utility. This scepticism would give rise to behavioural economics – the study of human decision-making.
Leading academics in this field, such as Daniel Kahneman, would argue that humans evolved to rely on automatic and intuitive decisions (what he calls system 1 thinking) rather than more slow and effortful choices (what he calls system 2 thinking). For example, Neanderthals seeing their fellow primates fleeing were likely to quickly join behind them, as hesitating to calculate the rational action could get them killed. This effect is known as ‘herding behaviour’, and a modern-day case would be a consumer buying an iPhone because over 40% of others in the UK have done so, rather than considering whether it is the best option for them.
By studying such cognitive biases, one can understand how policy-makers utilise choice architecture (how choices are presented) to influence people's real-world behaviour. The UK government established ‘The Behavioural insights Team’ in 2010 for this purpose. Covid-19 is a great example of when the government incorporated behavioural economics into their policy-making; we will study this using three cases.
Firstly, the UK’s controversial delay of its lockdown announcement to the 23rd of March 2020 was shaped by behavioural economics. During this time, government officials referred to the idea of ‘behavioural fatigue’, the phenomenon of individuals becoming less able or less willing to engage in certain behaviours over time. They argued that an earlier lockdown would have led to people breaking restrictive measures during the peak of the virus, when they were more critical.
Secondly, the government utilised ‘nudge theory’ during Covid-19. This involves small nudges towards certain behaviours in a subtle and non-intrusive way, while considering human decision-making. This is exemplified by the government markings indicating a two-metre distance in public areas and shops. This is a gentle reminder of the rules, which works as humans naturally gravitate to standing on these stickers subconsciously (system 1 thinking).
Thirdly, the government’s policies were influenced by the ‘Framing Effect’, a bias where people decide on options based on whether the choices are presented with positive or negative connotations. This is exhibited in an experiment where half a group of physicians were asked if they would perform a surgery with a one-month survival rate of 90%, and half were asked if they would perform a surgery with a 10% mortality rate in the first month. Adam Smith would expect the answers to be the same, but in the first frame 84% of the doctors chose it, while in the second, only 50% did. This shows that people are much more receptive to the positive idea of survival than the negative idea of death. This was considered during Covid-19, with the government often using phrases such as ‘save lives’ in their slogans rather than the alternative of ‘reduce deaths’.
In conclusion, the application of behavioural economics in policy-making during the Covid-19 pandemic highlights the importance of understanding human decision-making in shaping effective policy. From addressing the issue of behavioural fatigue to utilizing nudge theory and the framing effect, the UK government's response to the pandemic exemplifies how considering the biases and tendencies in human decision-making can lead to more impactful policies.
Dan is a first year undergraduate at the University of Bristol, studying Economics and Politics. He is passionate about behavioural economics and using economics to tackle complex issues such as global warming and catalysing the progress of developing countries.