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This paper introduces a special issue of Housing, Theory and Society entitled "Behavioural biases in the housing market". First, we provide a brief overview of theoretical considerations and empirical research applying the behavioural economics approach to housing market studies. Second, we summarize the topics of the papers included in the special issue and, finally, point out directions for future analyses involving behavioural economics and the housing market. [ABSTRACT FROM AUTHOR]

Tourists harm the destination environment in many different ways. Behavioural economics contributes to the formulation of public and private policies to reduce this harm. The nudging agenda is converging with tourism, where managers and policymakers realise that the implementation of nudges leads to lower costs, higher effectiveness of behavioural changes, and decreased harm produced by tourists. However, little effort has been made to comprehend the relationship between nudges and tourism sustainability. To fill this gap, this paper systematises the literature on nudge interventions in tourism and sustainability studies. Our results present the main disciplinary background in these investigations with Anglo-Saxon countries leading research on green nudges. The methodological approach adopted by the nudge studies is limited, and causal evidence is lacking. The thematic analysis categorises the interventions and supports the idea that nudges target both unconscious and conscious behaviours. The preferred interventions are those with a low-cost application, such as bed linen reuse. Social norms are the main trigger for developing hypotheses and designing nudges. Our study also presents the mediators and moderators of pro-environmental behaviours and develops a model to design nudges in the tourism industry. Theoretical, managerial contributions and suggestions for future studies are also discussed. [ABSTRACT FROM AUTHOR]

Behavioural economics and nudge theory have attracted much attention for engineering design in a broader context of sociotechnical systems, which provides new perspectives for engineering design when systems have interactions with human. This paper deals with service system design with a particular application to smart tip nudging. The conventional tip nudging approach that uses a set of default tip options lacks context-awareness and sometimes suggests inappropriate tip options. To address this problem, and to also increase tip revenues potentially, this paper proposes a smart tip nudging mechanism based on prospect theoretic modelling of customer tipping behaviours. The model proposes to use joint prospect values of both customers and service providers, which mimics the trade-off that customers make between their own economic gains and losses and the service provided by service providers. Meanwhile, this study provides a data-driven approach to parameter estimation of the prospect theory model, and it enables tip nudging to be context-aware for tip option adjustment by using intelligent reasoning techniques. One field experiment is conducted to validate the proposed system. [ABSTRACT FROM AUTHOR]

The present paper examines attribute substitution in terms of both heuristics and attribution theory in social psychology. Alternative 'old' approaches in psychology were special because they considered choice in terms that were similar to attributional inference in social psychology and anticipated limitations of the static heuristics and biases approach. Attribute substitution plays an important role in reflective reasoning as an independent entity relative to rationality and produces good decisions, even those are sub-optimal and may be influenced by primitive processes such as intuition and habits. The attribute-substitution research enhances our understanding of intense shifts in economic expectations. It makes possible the conceptual incorporation of substantive theoretical constructions, which are inherent in psychological propensities of alternative, and mainly, heterodox approaches in economics such as Post Keynesian, Institutional and Austrian economics. This research agenda paves the way for possible forms of synthesis of those theories with behavioural economics. [ABSTRACT FROM AUTHOR]

In The Community of Advantage, Robert Sugden reconstructs and defends an account of the liberal tradition (LT) in normative economics in the light of the findings of Behavioural Economics (BE). In this paper, the LT in neo-classical welfare economics which has roots in J.S. Mill's thought is contrasted with Sugden's account. Cass Sunstein and Richard Thaler's Libertarian Paternalism (LP) arguably attempts to reconcile the LT in neo-classical welfare economics with the findings of BE and to provide it with a Millian pedigree. To the extent that it attempts this, LP is unsuccessful. While Sugden abandons core elements of traditional normative economics – notably the 'view from nowhere', welfarism and the preference satisfaction view of welfare – which have a Millian pedigree and advances a contractarian alternative, he successfully reconciles his reconstruction of the LT with the findings of BE and also provides it with a sound Millian pedigree. [ABSTRACT FROM AUTHOR]

This paper responds to six contributions to a symposium on my 2018 book, The Community of Advantage. I defend that book's claim that most normative behavioural economics implicitly uses a psychologically ungrounded model of an 'inner rational agent'. I also defend the claim that, given the contractarian approach taken in the book, opportunity is normatively prior to welfare and to particular ingredients of well-being, such as health and perceptions of agency. I show how the Strong Interactive Opportunity Criterion proposed in the book can be extended to allow comparisons between the extent of opportunity provided by different economic regimes. [ABSTRACT FROM AUTHOR]

Behavioural economics has taught us that human agents don't always display consistent, context-independent and stable preferences in their choice behaviour. Can we nevertheless do welfare economics in a way that lives up to the anti-paternalist ideal most economists subscribe to? I here discuss Sugden's powerful critique of most previous attempts at doing so, which he dubs the 'New Consensus', as appealing to problematic notions of latent preference and inner rational agency. I elaborate on a fundamental rethinking of the normative foundations of anti-paternalist welfare measurement that often remains implicit in the behavioural welfare economics literature Sugden discusses, but which is required to make these accounts minimally plausible. I argue that, if we go along with this rethinking, Bernheim and Rangel's [(2007). Toward choice-theoretic foundations for behavioural welfare economics. American Economic Review, Papers and Proceedings, 97, 464–470. ; (2009). Beyond revealed preference: Choice-theoretic foundations for behavioural welfare economics. Quarterly Journal of Economics, 124(1), 51–104. ] choice-theoretic framework withstands Sugden's criticism. Sugden's own, more radical proposal is thus under-motivated by his critique of the 'New Consensus'. [ABSTRACT FROM AUTHOR]

The use and exploration of outer space is, according to the Outer Space Treaty (OST), to be carried out for the benefit and interest of all parties. Outer space is critically important to the defence and national security interests of many nations, none more so than the United States. Over time, a significant space junk problem has emerged. There is growing recognition of this problem and reason to believe that it will only get worse if current activities continue. Space junk presents a threat to the national security interests and economic interests of spacefaring nations. Various solutions are being proposed and developed. This paper presents an economic perspective and, in a particular, a behavioural economics perspective, on the space junk and national security problem. As various potential technological solutions emerge, we are interested in the obstacles that may stand in the way of an optimal prioritisation of the alternatives. [ABSTRACT FROM AUTHOR]

Recent developments in behavioural economics have posed a serious challenge to the assumption of rational choice underlying economic models. In particular, a number of so-called 'anomalies' in actual behaviour have been identified that are claimed to conflict with the implications of rational behaviour. This paper critically examines a number of such anomalies and tries to assess how far they actually challenge the precepts of rational choice. This assessment is made in the light of Amartya Sen's critique and refinement of rational choice theory. Using the lens of Sen's analysis, the paper finds that (a) many of the anomalies do not pose any challenge at all to even the narrowest version of the rational choice model, (b) some do challenge the narrow versions but not the broader ones, and (c) a few genuinely call for extending rational choice foundations of economic theory more radically – especially, in ways that Sen has been advocating for a long time. [ABSTRACT FROM AUTHOR]

This paper examines visions of 'learning' across humans and machines in a near-future of intensive data analytics. Building upon the concept of 'learnification', practices of 'learning' in emerging big data-driven environments are discussed in two significant ways: the training of machines, and the nudging of human decisions through digital choice architectures. Firstly, 'machine learning' is discussed as an important example of how data-driven technologies are beginning to influence educational activity, both through sophisticated technical expertise and a grounding in behavioural psychology. Secondly, we explore how educational software design informed by behavioural economics is increasingly intended to frame learner choices to influence and 'nudge' decisions towards optimal outcomes. Through the growing influence of 'data science' on education, behaviourist psychology is increasingly and powerfully invested in future educational practices. Finally, it is argued that future education may tend toward very specific forms of behavioural governance – a 'machine behaviourism' – entailing combinations of radical behaviourist theories and machine learning systems, that appear to work against notions of student autonomy and participation, seeking to intervene in educational conduct and shaping learner behaviour towards predefined aims. [ABSTRACT FROM AUTHOR]

Recently, there has been a surge of interest in Tradable Credits (TC) as an alternative measure to manage the growth of personal car use. This paper summarises the results and methodologies of studies that have sought to anticipate the behavioural responses to several proposed TC schemes that target personal travel. In a critical reflection on this work and in an attempt to inspire future research, we argue that future empirical studies on TC behaviours can greatly benefit from insights from the fields of behavioural economics and cognitive psychology. Therefore, in the second part of the paper, we bring together behavioural concepts from these fields that are relevant in a TC decision-making context. Based on observations from current TC studies and the behavioural mechanisms identified in the second part of the paper, we propose promising directions for future research on understanding the impact of TC on personal car travel. [ABSTRACT FROM PUBLISHER]

The literature dealing with aspiration traps indicates that a life of poverty, deprivation or exclusion may hinder people's development of goals and aspirations that would best serve their interests. Many authors seem to suggest that governments, schools, development agencies or NGOs should develop policies to help individuals avoid aspirations which are too low. However, it is not yet fully clear how these policies need to be designed in order to increase people's welfare. To bridge this gap, this paper compares two different welfare approaches and examines how useful these might be when looking at normative implications of policies regarding aspirations. Drawing on Sen's capability approach, we conclude that policies addressing aspiration traps need to be accompanied with policies that address, more directly, poverty and material hardship. To alleviate poverty, it can be helpful to make people reconsider their aspirations; however, this can complement but not substitute other policies. Moreover, to ensure that policies that address aspirations are not detrimental to welfare, they should not push people towards specific choices. [ABSTRACT FROM AUTHOR]

This paper explores the creation and use of a long-term global tourism transport model for private and public sector tourism policy makers. Given that technology is unlikely to reduce tourism transport's impact on climate change sufficiently to avoid serious dangers, behavioural change is necessary. The model presented here helps policy makers and the tourism sector evaluate behavioural change measures. Such tools to assess long-term (up to a century) policy impacts do not currently exist. Projecting behavioural change over such long periods is difficult with contemporary economic modelling. This paper's model is founded in psychological economics theory and mechanisms at work in product diffusion. It describes the tourism system based on identifiable mechanisms and not on statistical relations with only current validity. It delivers global numbers of trips and distances travelled per transport mode as a function of transport cost, travel time, population and income distribution. The model is based on theories including product innovation theory (Bass model) and prospect theory (psychological value). It has been successfully calibrated to tourism development between 1900 and 2005 and tested against future low and high growth economic and demographic scenario combinations. Implications for tourism travel and climate change are discussed. [ABSTRACT FROM PUBLISHER]

Performance-based management is a recurring and controversial strategy for education reform. This paper examines a nineteenth-century English experiment in paying schools by results and uses concepts from personnel and behavioural economics to understand its decline. Like many recent education reforms, payment-by-results sought to bring schools and teachers under the ‘laws of supply and demand’. The unintended outcomes of the policy, which ultimately led to its end, included narrowing of the curriculum, cheating and manipulation by schoolteachers and managers, and increased risk and uncertainty in the teaching profession. The paper begins by exploring the role of economics principles in the drafting of the policy. It continues to explore how the programme unravelled, with special attention to issues of perverse incentives, teacher motivation, risk, and uncertainty. Building on recent studies of analogous modern experiments in performance-based management, this paper finds important parallels to current policy concerns. The lessons learned address the fundamental relationship between incentives and teacher motivation and the role of economic theory in education policy. [ABSTRACT FROM PUBLISHER]

This paper examines the growing importance of digital-based financial inclusion as a form of organising development interventions through networks of state institutions, international development organisations, philanthropic investment and fintech companies. The fintech–philanthropy–development complex generates digital ecosystems that map, expand and monetise digital footprints. Its ‘know thy (irrational) customer’ vision combines behavioural economics with predictive algorithms to accelerate access to, and monitor engagement with, finance. The digital revolution adds new layers to the material cultures of financial(ised) inclusion, offering the state new ways of expanding the inclusion of the ‘legible’, and global finance new forms of ‘profiling’ poor households into generators of financial assets. [ABSTRACT FROM AUTHOR]

Planning has been widely vilified for the role it plays in disrupting the development process, hindering economic growth and creating the conditions for undersupply in housing markets, characterised by unaffordability. In this paper we hope to show that the analyses that support this view of planning are incomplete because of the theoretical limitations of the neoclassical tradition from which they emerge. By way of alternative we posit an account of planning that draws upon game theory and behavioural economics to explore those aspects of the activity that serve to animate the development process. This interpretation of planning as a “market maker” is explored through empirical case study research from three continental European contexts where planning is charged with playing an economically active role to control liquidity. [ABSTRACT FROM AUTHOR]

Economists have long understood that consumers frequently depart from the ideal of perfect rationality, but we have only relatively recently appreciated that these departures are largely predictable and so provide opportunities for firms to exploit consumers. The flip side to this is that there are also opportunities for competition authorities and regulators to intervene in ways that significantly benefit consumers. In this paper, we first describe a number of consumer biases that are relevant to competition policy. We then provide five “threshold questions” that regulators or competition authorities need to answer before they can intervene on behavioural grounds. These are designed to avoid unnecessary or poorly thought out interventions. We then provide four lessons that regulators and competition authorities need to learn in a behavioural world. These are designed to maximize the probability of proposed remedies solving the competition concern identified. [ABSTRACT FROM PUBLISHER]

The frequent use of the unifying term “behavioural economics” in contemporary economic theories and English housing policies masks divergent accounts of human ability, search processes and housing markets. The resurgence in interest in the behaviours of housing markets brings exchange mechanisms and housing search processes into sharp focus; this paper provides and applies a framework to assess the compatibility of behavioural economics theories of housing search. Assessing the ontological commitments of theories is possible through analysis of their conceptualizations of human ability, the search process and the structure and operation of the market. This assessment reveals a spectrum of diversity; distinctions between “old” and “new” behavioural economics are evident despite there being only limited acknowledgement of this variation. Whilst significant contributions to housing economics have taken place across the spectrum, clear distinctions are needed to prevent policy-makers’ inadvertently misapplying incompatible approaches to behavioural economics and to prevent inappropriate synthesis in academic theorization. [ABSTRACT FROM PUBLISHER]

Housing is a complex commodity and housing market choices carry with them substantial economic and social consequences for the households making them. Housing market decisions are complex, uncertain and involve expectations-formation. This paper argues that the standard economic theory of decision-making under uncertainty – expected utility theory – is particularly ill-suited as the basis for understanding such complexity. The paper then explores alternative avenues for potential development, reviewing the key characteristics of owner-occupied housing markets and housing search, and examining how the resources of institutional and behavioural economics could be used to inform our understanding of the residential mobility process. The paper concludes by outlining an agenda for empirical research. [ABSTRACT FROM AUTHOR]

This paper identifies a number of “psychological” elements in business cycle theories and shows how these components contribute to the theories’ results. It proceeds by discussing (i) which assumptions on behaviour were used, laying particular stress on expectations and confidence, money illusion, social preferences and interaction, and individual character traits; (ii) how they influenced and determined the theories’ results; and (iii) how more recent behavioural research provides a better and empirically grounded understanding of these factors. For each element, the possibility of incorporating new insights into older models is discussed, and references to work which already does so are given. [ABSTRACT FROM PUBLISHER]

The GB retail energy market, and Ofgem's regulation of it, have been controversial. In 2014 Ofgem asked the CMA to investigate. ItsProvisional Findingsof July 2015 take a similar approach to that of Ofgem since 2008. Both find weak customer response allowing unilateral market power, and support various regulatory interventions. The specific characterisation of the CMA's benchmark well-functioning market, with its requirement that firms have efficient costs, seems attributable to Ofgem. Possible reasons for similarities include Ofgem's involvement in the process before the CMA reference, policies of previous Governments including an initial strategic Steer to the CMA, and the increasing influence of behavioural economics especially via the OFT. Now the present Government has put in place a new Steer, without emphasis on consumer behavioural issues and with strong emphasis on deregulation rather than regulation. Experience and thinking about behavioural economics also continue to evolve. The paper discusses implications for the CMA. [ABSTRACT FROM AUTHOR]

Three different sets of approaches to understanding behaviour with respect to sustainable tourism mobility and consumption are identified in this paper: the utilitarian, social/psychological and the systems of provision/institutional approach. Each is based on different sets of assumptions on the factors that affect consumer sustainability behaviour. These assumptions not only affect the selection of policy tools to change behaviours but are also related to different modes of governance. Assumptions with respect to human behaviour and behavioural change and modes of intervention and governance are interrelated and mutually reinforcing and act as policy paradigms. Failure to recognise the importance of social structures in affecting behaviour has created a path dependency in which solutions to sustainable tourism mobility are only accepted within the dominant governance and behavioural paradigm. Other policy options and academic research that identify structures and institutions in systems of provision as a sustainability problem that requires non-market intervention and/or significant system change are regarded as marginal to the policy process or are ignored. It is concluded that all three different ways of approaching consumer behaviour are required if a sustainable transition to the socio-technological system of tourism mobility is to be made in a timely manner. [ABSTRACT FROM PUBLISHER]

Housing is a hot topic for economists, sparking numerous lively debates. Many of these address the vexed question of price: its micro-economic foundations and its macro-economic effects. Notwithstanding significant achievements, however, economics has struggled to account for home price dynamics using tried and tested tools. At the same time, other disciplines, ostensibly well placed to contribute, have tended to stand back. As the analytical task becomes more urgent, this paper considers the scope for rapprochement. Can cross-disciplinary alliances help establish whether housing markets are driven by hidden hands, animal spirits or some other financial intelligence? [ABSTRACT FROM AUTHOR]

This paper starts with an assumption that mainstream economics has limitations and that a behaviourally rich inter-disciplinary research programme can strengthen the field of housing studies by addressing some of these weaknesses. We note, however, that the heterogeneity of behavioural studies and, in particular, the bifurcation between ’old’ and ’new’ behavioural economics presents significant conceptual and operational challenges. We note, for instance, that the diversity within the existing literature might be viewed as evidence of a lack of coherence and could serve to undermine the case for a behavioural turn. To address this, we urge behavioural researchers to take great care in specifying their conceptual models and in demonstrating the rigour and robustness of their applied research methods. We also add our support to the call made in the focus articles for the need energise inter-disciplinary working in behavioural studies and, in particular, stress the need to work on resolving some of the tensions that might arise from attempts to blend the insights and approaches associated with different disciplinary perspectives. [ABSTRACT FROM AUTHOR]

How will housing markets respond to increased frequency and severity of flooding expected with global climate change? Existing models yield poor predictions because they assume perfect information and rational decision-making processes in the housing market. This paper sets out a plausible alternative framework for analysing housing price responses to flood frequency and severity based on findings of behavioural economics and the sociology of risk, which emphasise myopic and amnesiac perceptions of risk. It utilises this framework to analyse graphically a variety of flood scenarios and their implications for housing prices and government intervention. [ABSTRACT FROM AUTHOR]

This paper proposes core innovations in the strategy of research on demographic behaviour. One aim is a shift of attention away from events and towards a focus on dynamic processes and their interplay: away from a preoccupation with marriage and divorce, births, deaths, migrations, and household structure towards a broader perspective that takes account of partnership and intimacy, parenthood, potential and well-being, position in society and space, and personal ties. Another aim is a much closer engagement with genetics, neuroscience, psychology, and behavioural economics. A third aim is a strategy that pays more attention to pathways within the individual, to the processes entailed when the individual interacts with various contexts, and to progressions that involve the interplay of the pathways and processes through the life course. These shifts of emphasis, which have already begun to occur, require a systematic reassessment of priorities for research on demographic behaviour. [ABSTRACT FROM AUTHOR]

Two roles of experiments in behavioural economics are distinguished – experiments as exhibits and experiments as tests of theories. An exhibit is an experimental design which reliably induces a surprising regularity, typically combined with an informal hypothesis about the underlying causal mechanism. ‘Deviation theories’ – generalisations of received theories which incorporate additional causal mechanisms – are constructed so as to be consistent with known exhibits, and tested in new situations. The paper argues that the principles of good practice are different for the two types of experiment, in part because of a tendency for successful exhibits to be produced by several causal mechanisms. [ABSTRACT FROM AUTHOR]