Richard Thaler, the University of Chicago professor who fused psychological insights and economics to reveal how biases affect decision-making, was awarded Oct. 8 the 2017 Nobel Prize in economics. The award, which recognizes Thaler's work in overturning assumptions about economic behavior as rational and demonstrating how people could be "nudged" to make better choices, … [Read more...] about How Nobel Ideas Inspired the IDB
In the wake of its banking and economic crisis of 2002, Uruguay took some bold steps. Unlike other countries that squandered the commodities boom of the subsequent years, delaying fiscal reforms and, in many cases, worsening their long-term fiscal stance, the country embarked on a series of integral reforms in virtually every policy area, from public management systems to … [Read more...] about Should Reform Tackle Rules and Institutions Together?
What are the best ways to get people to change their behavior for their own, and society’s, good? Seeking to avoid coercion, policymakers increasingly turn to pricing strategies, like "sin taxes" on alcohol or cigarettes. Or they resort to techniques from behavioral economics like "nudges," which employ peer pressure, moral appeals and suggestive images—such as pictures of … [Read more...] about A Simple Nudge is a Better Nudge
Policymakers have long accepted the central role of innovation in spurring aggregate productivity and growth. They have looked at the arrival of new systems of organization and new technologies, from the steam engine to electricity and the internet, as catalysts to material progress in the modern age. But in doing so, they may have underestimated the importance of another … [Read more...] about When an Excess of Small Firms Hurts Productivity
When the clock strikes midnight on December 31, it's very common to start going over one's New Year's resolutions, like doing more exercise, eating healthier food or giving up bad habits. And it's equally common to forget those resolutions only a couple weeks later. For that reason, sometimes an incentive needs to be added to the good will. Prizes that reward positive changes … [Read more...] about Rewards Help Tax Payments Become "Contagious"