The Promise of Behavioral Economics in Local Government: Applications In Public Housing

The emergence of the field of behavioral economics has provided critical insights into the way people behave when confronted with decisions. Traditionally, economic models predict behavior that is economically rational, but behavioral economics has shown how people are often irrational in predictable ways because they are being affected by different biases and heuristics. For policymakers, these insights can show ways in which governments can change their behavior to take advantage of people’s humanity. This paper will show the value of taking these insights to the local level, as local governments provide a number of valuable services and account for the most direct and frequent interaction between citizens and their government. Specifically, this paper will look at the area of public housing in the United States. Public housing has gained a rather notorious reputation in the United States, as government policy and socioeconomic trends have caused public housing to house only the poorest of the poor. Still, public housing accounts for around 1.1 million households across America, and could benefit greatly from behavioral economic approaches to policy. This paper will look at the problems occurring in public housing, match these up to the behavioral “irrationalities” occurring in public housing, before finally providing a series of behavioral interventions which take advantage of these irrationalities to provide better services to public housing residents.