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Applies the psychological insights of behavioral economics to economic concepts such as moral hazard, deadweight loss, and incidence. Explores how deviations from the standard economic model of decisionmaking--imperfect optimization, bounded self-control, and nonstandard preferences--might affect public finance policy regarding externalities, information asymmetries, poverty, and taxes. - Provided by publisher

Behavioral economics has come to play an important role in evidence-based policymaking. In September 2015, President Obama signed an executive order directing federal agencies to incorporate insights from behavioral science into federal policies and programs. The order also charged the White House Social and Behavioral Sciences Team (SBST) with supporting this directive. In this article, we briefly trace the history of behavioral economics in public policy. We then turn to a discussion of what the SBST was, how it was built, and the lessons we draw from its experience and achievements. We conclude with a discussion of prospects for the future, arguing that even as SBST is currently lying fallow, behavioral economics continues to gain currency and show promise as an essential element of evidence-based policy.

Labor market policies succeed or fail at least in part depending on how well they reflect or account for behavioral responses. Insights from behavioral economics, which allow for realistic deviations from standard economic assumptions about behavior, have consequences for the design and functioning of labor market policies. We review key implications of behavioral economics related to procrastination, difficulties in dealing with complexity, and potentially biased labor market expectations for the design of selected labor market policies including unemployment compensation, employment services and job search assistance, and job training.

Governments are increasingly adopting behavioral science techniques for changing individual behavior in pursuit of policy objectives. The types of "nudge" interventions that governments are now adopting alter people's decisions without coercion or significant changes to economic incentives. We calculated ratios of impact to cost for nudge interventions and for traditional policy tools, such as tax incentives and other financial inducements, and we found that nudge interventions often compare favorably with traditional interventions. We conclude that nudging is a valuable approach that should be used more often in conjunction with traditional policies, but more calculations are needed to determine the relative effectiveness of nudging.