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Behavioral Public Finances

Author

Listed:
  • Teodor Sedlarski

    (Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski)

  • Gergana Dimitrova

Abstract

This article summarizes research findings in the literature on the application of behavioral economics principles to public finance within the emerging field of so called behavioral public finance. Mental biases and heuristics of economic agents like mental accounts, the endowment, isolation and disaggregation effects, the hyperbolic discounting, present-tense bias and others influence significantly attitudes towards taxes and human behavior in response to public sector policies in general. The effects of varying descriptions of financial measures, framing individual choices in different ways and leading to adverse economic decisions, raise the problem of the viability of the consumer sovereignty principle. To what extent can and should governments use insights from behavior economics to subtly pursue higher economic efficiency are two of the important questions that follow from the discussion.

Suggested Citation

  • Teodor Sedlarski & Gergana Dimitrova, 2016. "Behavioral Public Finances," Yearbook of the Faculty of Economics and Business Administration, Sofia University, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria, vol. 14(1), pages 235-254, March.
    • Handle: RePEc:sko:yrbook:v:14:y:2016:i:1:p:235-254
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