Session 1 of 21CPD: Paul Ormerod discusses “Network Effects and the Limits of Incentive-Based Policies”
You can access the videos for this session below. If you experience technical problems (embedding files doesn’t always work!) you can access the videos via Youtube. Paul’s speech can be accessed via this hyperlink and the Q&A via this link.
The Q&A Session:
Most social and economic policy in the West is based on incentives. Taxes, subsidies, and regulations – these are all held to be powerful and effective ways of altering behaviour. They do indeed change behaviour but the outcomes are rarely in line with the intentions of the planners. ‘Nudging’ is the latest manifestation of this incentive-based way of thinking. But social networks – real life ones rather than simply web based ones – have a much more powerful effect on the outcome of public policy, and these are hardly ever accounted for in policy development.
Social networks have important effects on how we act, and therefore on the success of government policy e.g. towards obesity and alcohol consumption. Peer pressure, peer acceptance, copying, and imitation: these are the hallmarks of how people behave in the 21st century and they make the challenge for government much more “complex”. However there are now new tools available to help us make better sense of network-influenced policy challenges and to formulate policy in the 21st Century.
Prof Ormerod is a Director at Synthesis and a partner in Volterra. He is the author of 3 best-selling books on economics, Death of Economics, Butterfly Economics and Why Most Things Fail, a Business Week US Business Book of the Year.