Behavioural Regulation Alberto Alemanno HEC Paris NYU School of Law
our understanding of regulation is set to change as a result of behavioural sciences involve the systematic analysis and investigation
of human behaviour through controlled and observation. how humans actually behave (when they make choices)
humans are not but
Rational Irrational Reflective
Emotional Why this matters for policymakers?
a few illustrations of insights from behavioural research 1. framing
around 70% 90% OK around 35%
10% SIDE EFFECTS even small apparently insignificant details
can have major impact on peoples behaviour 1. framing
The location of food items in a cafeteria produce some unexpected impact i.e.
You are able to increase/decrease the consumption of many items by as much as 25%
lesson learned people influenced by how information is framed choices not affected by properties but frame context matters
2. the power of inertia lesson learned Automatic enrollment more participation
Inertia means default matters 3. Social influence + 25%
but also Anchoring - tendency to rely too heavily on one piece of information when making decisions Loss aversion/Endowment effect A loss from the
status quo perceived as more undesiderable than a gain Group polarization/Confirmation bias - to favor information that confirms preconceptions regardless of whether the information is true Zero-risk bias preference for reducing a small risk to
zero over a greater reduction in a larger risk Informational cascades Choice and information overload Lesson learned
how actually people make choices? an alternative view of human agent
of utmost importance for policymakers success of policymaking depends on understanding of peoples behaviour
yet despite failure to predict peoples behaviour little efforts at understanding behaviour in
policy circles. Why so? while behavioral research demonstrates the
extent and limits of rational action, it does not provide regulators with a ready-made framework for incorporating its insights into policy making
generally no formal recognition timid use of behavioural research lack of systematic integration in policymaking
avantgarde EO 13563 June 2012 where relevant, feasible, and consistent with
regulatory objectiveseach agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. These approaches include warnings, appropriate default rules, and
disclosure requirements as well as provision of information to the public in a form that is clear and intelligible. Randomised
controlled trials (RCTs) Random allocation to groups RCT is an experimental design which involves random allocation of participants, either to an
experimental group which receives some form of treatment or intervention, or to a control group which receives no such special treatment or intervention.
experimental group control group Consumer Rights Regulation
Article 22 Additional payments Before the consumer is bound by the contract or offer, the trader shall seek the express consent of the consumer to any
extra payment in addition to the remuneration agreed upon for the traders main contractual obligation. If the trader has not obtained the consumers express consent but has inferred it by using default options which the consumer is required to reject in order to avoid the additional payment, the consumer
shall be entitled to reimbursement of this payment. to address power of inertia Distance Selling Directive
Cooling-off period of 15 days myopia/impulse buying web screen ballot-box
encourages active choice of preferred browsers, and implicitly removes the impact of default You limit the ability of operators to leverage on cognitive biases (debiasing through law)
but. also possible to positively use them Consumer Information Regulation (look for better image in terms of definition)
same field of vision tabular format Environmental Labelling
19.12.2012 A nudge?
The features of Behavioural Regulation The appeal
Conventional Regulation Behavioural Regulation Reduce the options:
limits choice Changes the environment of choice: choice-preserving
Rests on the assumption that people behave rationally Rests on the assumption that people conditioned
less funding Evidence-based (real) Evidence-based (laboratorysetting)
Adversial to the industry Cooperative with the industry
The flaws Legitimacy Effectiveness Design
Legality Legitimacy Effectiveness Design
Legality legitimacy how comfortable citizens are with having experts and bureaucrats designing policies limiting the
exercise of their individual autonomy? Response: 1. choice-preserving 2. neutral settings do not exist
Legitimacy Effectiveness Design Legality
Once we accept it How we design behavioural-informed regulation?
EO 13563 June 2012 where relevant, feasible, and consistent with regulatory objectiveseach agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of
choice for the public. These approaches include warnings, appropriate default rules, and disclosure requirements as well as provision of information to the public in a form that is clear and intelligible.
privileged tool Impact Assessment prospective analysis of
ECONOMIC SOCIAL ENVIRONMENTAL impacts EUROPEAN COMMISSION: Guardian of the EU Treaties;
Promotes the EU interest; Monopoly of legislative initiative EUROPEAN PARLIAMENT Co-legislator, representing EU
population COUNCIL OF MINISTERS: Co-legislator, representing Member States
governments European Court of Justice Interprets EU legislation What is regulatory Impact Assessment
Impact assessment is performed for all new proposals for legislation and for some other major policy initiatives. IA is embedded
within a framework for policy-making Definition of objectives Comparison
and analysis of options Developt of options
Monitoring & evaluation
Conducted in accordance with IA Guidelines behavioural impact - design policy options (e.g. a behaviourally-informed options)
- road-test policy intervention (e.g. efficiency ? compliance rate?) in so doing should be able to interact with network of
national, local and international actors experiencing behavioural intervention across the EU and beyond Legitimacy
Effectiveness Design Legality legality
Are public administrations empowered to manipulate/play on the cognitive framework of their citizens? Is our legal system ready for it?
As nature of public action shifts from coercion to persuasion checks & balances must adapt
behavioural regulation is based on invisible design-based interventions aimed at interfering with the private space of individuals
whose legal effects difficult to determine and increasingly personalised What is at stake Freedom of expression
Privacy: right to informational self-determination Principle of legality Principle of impartiality
Judicial review and behavioural informed regulation regardless of what you think,
a new principle enlightening regulation you should
regulate how people behave not how they are assumed to behave. Thank you for your attention!
more at www.albertoalemanno.eu Bibliography by A. Alemanno
Nudging Legally On the Checks and Balances of Behavioural Regulation, INTERNATIONAL JOURNAL OF CONSTITUTIONAL LAW, 2014 (with A. Spina). Nudging Healthy Lifestyles Informing Regulatory Governance with Behavioural Research, EUROPEAN
JOURNAL OF RISK REGULATION, Vol. 3, No. 1, January 2012 (with Amir, On and Bovens, Luc and Burgess, Adam and Lobel, Orly and Whyte, Kyle Powys and Selinger, Evan).
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