In his address at the launch of the Canberra Behavioural Lab, on 28 August 2025, Assistant Minister for Productivity, Competition, Charities and Treasury, Dr Andrew Leigh explained the benefits of behavioural economics in working out how humans make decisions – not at all as we might think – in order to help policymakers make informed decisions.
“Behavioural economics matters because it gives us a richer picture of human decision‑making – one that recognises our biases, habits and heuristics. It blends the insights of psychology and economics, and in doing so, it helps policymakers design choices that work better in the real world”.
He mentions its application in Australia
“to everything from tax compliance to energy efficiency”, where “small, well‑designed interventions can change behaviour and tackle big challenges …”.
Dr Leigh sees behavioural economics as a powerful complement to a move to evidence‑based policy to try to ensure that a policy or program “actually makes life better for the people it’s designed to help”. The Can Be Lab brings together economists, psychologists, marketers, technologists and policymakers to assist that process.
Comment
With the limited benefit only of private research, I have looked into behavioural economics in the way that insolvency laws are framed – confronting biases against recognising business failure, biases in favour of thinking “things will work out”, and against seeking advice because of what you might find out.
Laws against insolvent trading do not at all address the usual criteria for influencing or deterring the further incurring of debt: see The empty threat of insolvent trading.
“Debtor in possession” types of restructuring have their beneficial behavioural incentives: Insolvency and debtor in possession – hospital or home care? – Murrays Legal
The 2023 PJC Report refers to the recent work of the Behavioural Economics Team of the Australian Government (BETA) in seeking to improve accuracy in PPS registrations in light of undue complexity of the PPS Register.
Similarly, the PJC Report recommended that the current complex series of pathways in corporate insolvency be reviewed from a holistic systems analysis perspective.
As to evaluations of law reform changes introduced, there is also its frustrating absence, generally – changes that were said by the lawyers and others at the time to be absolutely necessary to, for example, deal with phoenix misconduct, but which, once enacted, were simply left to have their legal run; with any proper evaluative review probably likely to have found that certain behavioural tweaks up front would have been better.
ASIC’s reports on the 2021 Part 5.3B regime are an honourable and worthy exception.
Too many lawyers
As I say, and against myself:
“The trouble with insolvency law reform in Australia is that it suffers from a lack of input from the behavioural and social sciences, and economics and more, and from too many accountants and lawyers, myself not excluded.
More than many other areas of law, insolvency deals with human behaviour in a range of contexts – involving loss of money, lifestyle, standing, with high stakes allowing complete absolution, but also scope for wrong dealing. Law and less so accounting can devise the structures but to have those structures applied and be useful involves input from other disciplines; and other thinking …”.
Dr Leigh
Dr Leigh is now in charge of both personal and corporate insolvency law and its reform, among other areas of law and policy.
