Using behavioural economics to inform decision making

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May 7th, 2014

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New measures recently announced by the government will give us the freedom to choose to spend our pensions on what we wish to.  Like many matters of policy, at the heart of this is the question of how you view human nature.  Are people rational utility-maximising economic agents who will manage their money responsibly and stretch their pennies out over a long retirement?  Or are they feckless spendthrifts who will withdraw their whole pension pot early and blow it on a Lamborghini?

Like most, I suspect the complexity of human nature lies somewhere between the two extremes of Lamborghini lust and robotic utility-maximisation.  Behavioural Economics (BE) promises to shed some clear light on exactly where.  If you browse the real or virtual shelves of a bookshop these days, you are likely to find several best-sellers which draw on BE to offer some intriguing-sounding insights into why we as humans do what we do – and how we can change this. According to these books, behavioural economics can help us uncover systematically assumptions we are making, gain control over our behaviour, and understand ourselves and our natures better.

Both governments and businesses have drawn on BE research to find effective ways of understanding and influencing people’s behaviour.  Yet very little of the focus and literature has been on how we can use this information ourselves, as individuals, to increase self-awareness and make better choices and judgements, day to day (with one notable exception here being the RSA.  See for example: http://www.thersa.org/about-us/media/press-releases/why-be-nudged-if-you-can-steer).

My paper, published recently on Roffey Park’s website, looks at what behavioural economics can tell us that might help individuals understand and change their own behaviour.  For example, why do people sometimes have the self-control to stick to their plans, and sometimes not?  Is willpower simply an innate characteristic, or are there ways to develop it?  What assumptions are we making that we might not be even aware of?

Holly Crane is an alumni of Roffey Park’s MSc in People and Organisational Development.  Holly has been coaching for over 10 years, and enjoys working with executives, career-changers, entrepreneurs and social entrepreneurs. Her main professional background is management consultancy and she has also worked at a thinktank and as a freelance journalist. 

Holly’s paper – Behavioural Economics – a coach’s view – can be downloaded from our website and is an adapted version of her dissertation which led to the achievement of her MSc.