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Market-Based Solutions to Vital Economic Issues
Research
Jan 7, 2014

A Fairly Mechanical Method for Policy Innovation

Abstract

Defaults exert a strong and predictable influence over behavior (Goldstein et al., 2008; Johnson, Belman, & Lohse, 2002). In European countries with opt-in organ donor pools, it is rare for greater than 20% of the population to opt in, while in opt-out countries it is not unusual to find that over 99% of the population are organ donors (Johnson and Goldstein, 2003). This example is a situation where a no-action default drastically affects outcome. More generally, as argued by Thaler and Sunstein (2008), defaults can be used to encourage individual behavior to increase societal welfare in a way that a law, which removes all personal responsibility for the decision, cannot.


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