Professor Paul Ormerod
In recent years, public policy has been rushing to catch up with the insights of behavioural economics, which aims to capture the way people really make decisions. From this has sprung nudge theory and ideas including the use of default opt-ins to encourage pension scheme take-up and prompting individuals to make active choices on organ donation.
But in the rush to understand what affects individual decision-making, are we missing the bigger picture? In a confusing world with so much information, people are arguably relying more on copying and imitation as a way of making choices. The theory of networks can dramatically increase our understanding of how people make decisions about their health, consumption and employment, as well as offer a better insight into financial crises and the macro-economy. Paul Ormerod, described as a “paragon of innovative economic thinking” by the Financial Times, explores how these network effects can affect people’s decisions and what this means for public policy.