Applying Behavioral Economics to the Public Sector

“Behavioral economics”, or the application of methods and evidence from other social sciences to economics, has increased greatly in significance in the last two decades. In this paper we discuss the basic elements of behavioral economics. We then assess several applications of behavioral economics to the analysis of the public sector, including specific applications to public economics and, importantly, to the closely related area of public budgeting. We conclude with suggestions on –and predictions of–topics in which future applications should prove useful.