Policy and Choice: Public Finance through the Lens of Behavioral Economics - Softcover

Congdon, William J.

Softcover

ISBN 10: 0815722583 ISBN 13: 9780815722588

Publisher: Brookings Institution Press, 2011

Synopsis

Traditional public finance provides a powerful framework for policy analysis, but it relies on a model of human behavior that the new science of behavioral economics increasingly calls into question. In "Policy and Choice" economists William Congdon, Jeffrey Kling, and Sendhil Mullainathan argue that public finance not only can incorporate many lessons of behavioral economics but also can serve as a solid foundation from which to apply insights from psychology to questions of economic policy. The authors revisit the core questions of public finance, armed with a richer perspective on human behavior. They do not merely apply findings from psychology to specific economic problems; instead, they explore how psychological factors actually reshape core concepts in public finance such as moral hazard, deadweight loss, and incentives. Part one sets the stage for integrating behavioral economics into public finance by interpreting the evidence from psychology and developing a framework for applying it to questions in public finance. In part two, the authors apply that framework to specific topics in public finance, including social insurance, externalities and public goods, income support and redistribution, and taxation. In doing so, the authors build a unified analytical approach that encompasses both traditional policy levers, such as taxes and subsidies, and more psychologically informed instruments. The net result of this innovative approach is a fully behavioral public finance, an integration of psychology and the economics of the public sector that is explicit, systematic, rigorous, and realistic.

About this title

Product Description:

Traditional public finance provides a powerful framework for policy analysis, but it relies on a model of human behavior that the new science of behavioral economics increasingly calls into question. Policy and Choice argues that public finance not only can incorporate many lessons of behavioral economics but also can serve as a solid foundation from which to apply insights from psychology to questions of economic policy. The authors revisit the core questions of public finance, armed with a richer perspective on human behavior. They do not merely apply findings from psychology to specific economic problems; instead, they explore how psychological factors actually reshape core concepts in public finance such as moral hazard, deadweight loss, and incentives. The book builds a unified analytical approach that encompasses both traditional policy levers, such as taxes and subsidies, and more psychologically informed instruments.

Review:

'A must-read for students of public finance. If you want to learn how the emerging field of behavioral economics can help lead to better policy, there is nothing better.' --N. Gregory Mankiw, Harvard University, former chairman of the President s Council of Economic Advisers, and author of Principles of Economics

'This fantastic volume will become the standard reference for those interested in understanding the impact of behavioral economics on government tax and spending policies.' --Jonathan Gruber, Massachusetts Institute of Technology, former Treasury Department official, and author of Public Finance and Public Policy

'The proper design of public policy has never been more important, and it will be shaped by the emerging insights of behavioral economics. Congdon, Kling, and Mullainathan have produced a clear and accessible road map to the key issues.' --Douglas Holtz-Eakin, American Action Forum president and former director of the Congressional Budget Office

About this edition

• Publisher: Brookings Institution Press
• Publication date: 2011
• ISBN 10: 0815722583
• ISBN 13: 9780815722588
• Binding: Paperback
• Number of pages: 257