The IMF is predicting the worst fall in UK GDP since the Great Depression of the 1930s due to the COVID-19 pandemic and new BIT research undertaken this month found that 55 per cent of people in the UK think that the economy has become more unfair over 2020 as the COVID-19 pandemic has hit*.
Either of these trends would be major issues for economic policy makers at any time, but combined they present even greater challenges. However compared to the last financial crisis in 2008 when behavioural science was not as well developed as it is today, a new 10-point manifesto published today by The Behavioural Insights Team sets out a clear roadmap for how governments, regulators and central banks can start using these tools and approaches.
The report, The Behavioural Economy, brings together 10 evidenced-based strategies for policymakers, regulators and researchers to build household and job resilience, makes businesses and markets more productive and ultimately improves the performance and structural long term potential of the UK economy.
The recommendations are grouped into three areas of economic policy: micro, meso (ie market), and macro-level. The 10 recommendations are:
1. SAVING: Help people save for the future through restructuring tax incentives to build on the dramatic shift in personal savings that has occurred during the pandemic.
2. JOBS: Use behavioural and data science to open up new job opportunities and equip jobseekers with the support they need, focusing on job goals rather than compliance with benefit criteria.
3. DATA: Measure whether markets are delivering for consumers and small businesses, collecting data on how complex it is to change suppliers and get the best deal.
4. MARKET TRANSPARENCY: Make it easier to see the best performers in professional services such as accountancy and law as well as with all government suppliers. Make it easier to see the best employers for job quality.
5. SWITCHING COSTS: Design and test Smart Data initiatives to attack switching costs and help consumers compare and change energy, telecoms and financial providers.
6. DISRUPTION: Kick-start market disruptors using challenge funds and shared facilities and equipment that reduce the cost of investing in innovation.
7. PLAN AHEAD: Prepare for the next economic shock by building data, infrastructure and know-how on how to get stimulus spending to where it’s most needed – and fast.
8. PROMOTE INVESTMENT: Restructure business tax reliefs to target key moments when business leaders are making crucial investment decisions.
9. SOCIAL TRUST: Measure it and make it an integral part of economic policy making
10. CHALLENGE: Test, measure and learn by using pre-mortems and encouraging oppositional thinking to established norms (so called ‘red teams’) to minimise biases that result in bad decisions such as optimism bias, confirmation bias and group reinforcement. Then reinforce this approach with rapid online testing before rolling out new policies.
Nida Broughton, Director of Economic Policy at the Behavioural Insights Team and lead author of Behavioural Economy said: “We’re living through the most challenging economic times in a generation and policy makers need to have every tool and strategy available to successfully navigate this disruption. Behavioural insights can contribute to this immense challenge by putting a deep understanding of people and their motivations and incentives right at the heart of economic policy making.”
Danielle Walker Palmour, Director of Friends Provident Foundation said: “At this juncture, economic policy needs to be shaped by people’s real needs and behaviours. We are pleased to support the development of this BIT agenda for doing just that.”
The Behavioural Economy report can be downloaded here.
* Online survey run via BIT’s Predictiv platform, with 987 respondents, 6-9 January. Respondents were asked, “Do you think the way the UK economy works has become more or less fair over the last year?”. 55% responded “less fair”, 16% responded “more fair”, 30% responded “no change”
About the Behavioural Insights Team
The Behavioural Insights Team (BIT) is one of the world’s leading behavioural science organisations, working around the world to improve people’s lives.
Through its teams in the UK, US, Australia, Canada, France, New Zealand and Singapore BIT works in partnership with governments, local authorities, businesses and NGOs in over 30 countries, often using simple changes to tackle major policy problems and deliver improved public services and social outcomes.
BIT was established by the UK government in 2010 and in 2014 became an independent social purpose company, owned by the Cabinet Office, innovation charity Nesta, and BIT employees.
About Friends Provident Foundation
Friends Provident Foundation is an independent charity that makes grants and uses its endowment towards a fair and sustainable economic system that serves people and planet – connecting, funding, supporting and investing in new thinking to shape a future economy that works for all.