Wednesday, November 16, 2011

The severe limits of Behavioural Economics

By the yardstick of business, the government has been very slow at warming to behavioural economics. Against other governments, they are at the vanguard.

Ravi Menon begun his speech with a story of how the Swiss tried to persuade their local communities to accept nuclear waste in their backyard. The Swiss surprised the government with accepting them. Now if the Chinese government would try the same, I am sure the response could not be more different from the Swiss. Quite the opposite of the laws of Physical Science, this new stuff is empirical and not easily transferable. The academic background and intellectual tradition of the civil service does not lend itself to common sense when there are scientific options available even when they are misapplied. I had seen in my previous life how they had abused scenario planning. There are countless examples available from management journals and books.

Keep behavioural economics as a work in progress or it will quickly disappoint.

We are handcuffed by civil servants who constantly worry about the impact to their careers if they fail. There would be more breakthroughs if they are managed and led better than entertaining semi-theoretical frameworks in the social sciences.

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