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Behavioral Economics and Financial Regulation

Behavioral Economics and Financial Regulation

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Behavioral Economics and Financial Regulation

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Presentation Transcript

  1. Behavioral Economics and Financial Regulation David S. Evans Privileged and Confidential

  2. Behavioral Economics (and Why you Should Care)

  3. Behavioral Economics Combines Economics and Psychology

  4. Behavioral Law and Economics Applies BE to Regulation

  5. Behavioral Economics Has Come to Town

  6. Why Should You Care?

  7. Key Findings of Behavioral Economics

  8. After Several Million Years You’d Think We’d Be Smart

  9. But Behavioral Economics Finds People Aren’t So Smart…

  10. Cross-Cutting Biases

  11. Expectation Biases

  12. Price and Valuation Biases

  13. Preference Biases

  14. Perhaps Its All Been Said Before • An 1884 editorial in Scientific American discussed “the curious processes of reasoning” that women used in deciding to buy a sewing machine on an installment plan. The author discovered the “psychological fact, possibly new,” that women “will rather pay $50 for a machine in monthly installments of five dollars rather than $25 outright, although able to do so.”

  15. Behavioral Economics Based Regulation

  16. Helping People Help Themselves

  17. Soft Paternalism

  18. Hard Paternalism

  19. Reasons to be Skeptical of BE-Based Regulation

  20. Not so Easy Problems Perhaps

  21. CFPB and Application to Financial Markets

  22. Behavioral Foundations of CFPB Regulation

  23. Sample “Problems” in Financial Services

  24. Preemptive Design Principles

  25. Conclusion

  26. Concluding observations

  27. THANK YOU! devans@globaleconomicsgroup.com www.globaleconomicsgroup.com/