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‘We Will End Up Being a Third Rate Economy … A Banana Republic’: How Behavioural Economics Can Improve Macroeconomic Outcomes
Author(s) -
McDonald Ian M.
Publication year - 2017
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12199
Subject(s) - economics , loss aversion , perspective (graphical) , resistance (ecology) , wage , low wage , public economics , labour economics , microeconomics , ecology , artificial intelligence , computer science , biology
To address the economic problems facing Australia in 1986 required wage restraint, which required in turn overcoming loss aversion by workers with respect to their wages. The Prices and Incomes Accord was able to do this. Attempts to address Australia's current economic problems are stymied by tax resistance. Addressing tax resistance requires overcoming loss aversion by voters with respect to their post‐tax incomes. The success of the Accord suggests that Accord‐type policies could reduce tax resistance by broadening people's perspective beyond their post‐tax incomes to the broader spread of benefits for them and others .