Behavioral economics can inform public finance policies from "summary" of Public Finance by Harvey S. Rosen
Behavioral economics can provide valuable insights for policymakers in the realm of public finance. Traditional economic models often assume that individuals are rational actors who make decisions based on maximizing their own utility. However, behavioral economics recognizes that human behavior is influenced by cognitive biases and heuristics that can lead to suboptimal decision-making. By incorporating insights from behavioral economics, policymakers can design more effective and targeted public finance policies. For example, behavioral economics research has shown that individuals tend to have a present-bias, meaning they place greater value on immediate rewards compared to future benefits. This insight can inform the design of tax incentives or subsidies that encourage individuals to save or invest for the future. Furthermore, behavioral ...
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