ABSTRACT
This chapter examines attempts by policy makers to incorporate insights from behavioural economics, behavioural finance and cognitive psychology into policy aimed at alleviating poverty. It proceeds by presenting some of the behavioural insights which have been identified as making poverty more difficult to escape. The chapter then describes the development in the United Kingdom and United States of the discipline of behavioural economics, and the movement to use these insights from behavioural economics and other behavioural sciences to inform government interventions, and its rapid spread internationally. Special attention is paid to the concept of ‘nudge’ and the idea of developing programmes through randomised controlled trials. The chapter then describes the research into the psychological effects of poverty. Though this field is still in its infancy, a range of ways this research might be applied to policy and programmes are canvassed, including interventions aimed at influencing household saving and borrowing, productivity and investment in human capital through responsive parenting and post-compulsory schooling. Behavioural insights also have implications for the design of labour regulations and welfare state transfers. Attention then turns to critiques directed at behavioural public policy, including concerns about paternalism and what critics see as a misguided focus on individual-level causes of poverty at the expense of structural causes.
