Great ideas in behavioral public financial management

The study of public finance has always been behavioral, if only implicitly. However, the new wave of behavioral research has explicitly modeled and tested for individual-level behaviors. Behavioral research in public finance started as an outgrowth in research on behavioral economics and finance, popularized by the work of scholars who questioned the assumptions underlying traditional economic and financial models. In this chapter, we trace the development of the behavioral paradigm from early roots in the 1940s to the “behavioral revolution” in the 1970s and 1980s to the work’s present nature. We then develop a typology of studies depending on their methodology, model, and subject area. We contrast the behavioral studies results with more traditional approaches and conclude with a discussion of opportunities for future use of behavioral studies in developing a better understanding of forces and factors driving public finance.