The Biases of Policymakers

A large literature focuses on the biases in individual decision-making, and policies undertaken to mitigate these biases. However, there is little attention devoted in the literature on the biases of policymakers themselves. ... [ view full abstract ]

A large literature focuses on the biases in individual decision-making, and policies undertaken to mitigate these biases. However, there is little attention devoted in the literature on the biases of policymakers themselves. Using a novel subject pool of development professionals (employees of the World Bank and the Department for International Development in the UK), we conduct a series of survey vignettes using classic behavioural experiments adapted to the development context. The experiments focus on framing (gains vs. losses), risk aversion in a policymaking context, sunk costs and confirmation biases. We find that policymakers (similar to average individuals) are consistently biased in their decision-making. We find evidence for risk seeking in losses, and risk aversion in gains; greater risk-aversion when undertaking policy decisions; sensitivity to sunk costs; and prior beliefs influencing the evaluation of data (confirmation bias).