Poverty and behavioral economics

  • DATE / TIME:
    2011•09•01 - 2011•09•02

    This conference will take stock of current knowledge about development economics and, in particular, the behaviour of poor households in poor economies, to draw out major policy implications and chart promising areas for research.

    UNU-WIDER conference: Poverty and behavioural economics

    In the last two decades, questioning of the textbook model of individual choice behaviour has accelerated. “Imperfections” of individual choice behaviour are increasingly accepted by the profession as viable empirical phenomena to be explained and incorporated. Nobel Prizes to Daniel Kahneman and Vernon Smith have confirmed this recognition. Non-standard objectives and decision-making—procrastination; overweighting low probability outcomes; focus on changes from current wealth as a reference point; choice between two alternatives depending on which is presented as the default option; willingness to sacrifice return for fairness of process or outcome, etc. — have been investigated theoretically, empirically and experimentally.

    The insights of behavioural economics have begun to be applied to development economics and in particular to the behaviour of poor households in poor economies. Does poverty promote departures from the standard text book model of rational choice? Do such departures in turn promote poverty and hold back development and growth? And what policy interventions are appropriate for growth and poverty reduction in such a world? The importance of these questions is self-evident. It is giving rise to a still small but growing and vibrant literature which incorporates field experiments, new theorizing, and new ways of interpreting econometric evidence.

    Given this background, UNU-WIDER will hold a major conference in Helsinki to take stock of current knowledge, to draw out the major policy implications, and to chart promising areas for research. The conference will be wide-ranging, focusing on poverty but with the perspective of development economics broadly construed.