Friday, February 29, 2008

Barack Obama and Behavioural Economics

This blog is not in the business of endorsing US presidential candidates. Nor we harbor illusion that our position can move votes there.

Nevertheless, as economist wanna-be I could not help but excited over an article (click here) that point how Richard Thaler, one of the early economist that point out behaviour anomalies could not be explain by standard model, is in close contact with the candidates. Behavioral Economics is currently getting stronger hearing in the mainstream after recognition from Nobel Prize committe in 2002 & 2005.

One of Obama policy attributed to his influence cited in the article is:

“For example, one key behavioral finding is that people often fail to set aside money for retirement even when their employers offer generous 401(k) plans. If, on the other hand, you automatically enroll workers in 401(k)s but allow them to opt out, most stick with it. Obama's savings plan exploits this so-called status quo bias.

Good to know that Obama that despite his soaring rhetoric (watch here and here), base his policy on solid and strong economic ideas. They say that economics has turned cynical and can do nothing but become empty shell of materialism. They say that economics can not bring insight about real human behavior into useful policy recommendation. To those charges, let us answer in three words. Yes, we can!

Addendum (01/03/08) from an article in The Economist:
"His chief economic adviser, a respected young academic called Austan Goolsbee of the University of Chicago, is sensible and pragmatic. His plan to save millions of people from struggling to fill out their tax returns is a gem. Anyone who earns only a salary and bank interest, both of which are automatically reported to the taxman, will be sent a tax return that has already been filled in, which they can accept or reject. At a stroke, countless headaches would be averted."


colson said...

It's good news that next to economic wisdom, some sociological and socio-psychological wisdom is to be part of the Obama policies.

And maybe economists can learn that they only can tell part of the story.
An very important part that is, but with the characteristics of a weather forecast.

Berly said...

We are only human..

Thus economists and policy maker need to understand human behavior to design appropriate policy.

Some humility could goes a long way

fajar said...

salam kenal