EconPapers    
Economics at your fingertips  
 

Opportunity cost neglect in public policy

Emil Persson and Gustav Tinghög

Journal of Economic Behavior & Organization, 2020, vol. 170, issue C, 301-312

Abstract: Opportunity cost is the foregone benefit of options not chosen. If opportunity costs are neglected in decisions about public policy, there is a high risk that the best options are overlooked. We study opportunity cost neglect in public policy in experiments with members of the general public in Sweden and international experts on priority setting in health care (n = 957). We find strong evidence of opportunity cost neglect in public policy, where participants who acted in the role of policy makers were between six and ten percentage points less likely to invest in a public health program when reminded about opportunity costs (money could fund other health programs). To our surprise, we failed to confirm an effect consistent with opportunity cost neglect in private consumption; but exploratory analyses revealed a substantial age effect that reconciles our findings with previous literature. Young participants showed opportunity cost neglect, while the effect was reversed for old participants. The implications of opportunity cost neglect for public policy are substantial, including misallocation of public resources and an artificially high demand for public spending.

Keywords: Opportunity cost neglect; Policymaking; Experts; Decision-making; Bias; Replication (search for similar items in EconPapers)
JEL-codes: C9 D1 H4 H5 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268119303956
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:170:y:2020:i:c:p:301-312

DOI: 10.1016/j.jebo.2019.12.012

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-07-31
Handle: RePEc:eee:jeborg:v:170:y:2020:i:c:p:301-312