Behavioral Interventions: Designing Policy For Real People
By Karla Hoff, Co-Director, World Development Report 2015, The World Bank
To describe homo economicus is fairly simple: consistent, selfish, looking out for himself and acting accordingly. Policies in the past decades strongly focused on this model, and policy-makers designed their policies using incentives, regulation, and information as tools to reach their goals. Yet, this approach to policy-making often does not work as expected, and there are often other policy interventions that in principle should not work but that in fact do work. Why is that? The answer is obvious: Real people behave differently from the made-up model of homo economicus. More than that, the differences are systematic.
Three Principles Left out of Standard Economics
A richer understanding of human behavior can make policies more effective. The World Bank’s World Development Report 2015 explores this theme and shows that incorporating psychological and sociological insights into policy design can lead to better policies.
The Report draws on cutting-edge work to create a framework of human thinking, centered on three principles left out of standard economics: Thinking automatically, thinking socially, and thinking with mental models.
Thinking Automatically: Latch onto the Default
Automatic thinking is effortless, intuitive, and associative. It takes into account only information that comes easily to mind. The automatic system is, as the Nobel laureate Daniel Kahneman wrote, “the secret author of many of the choices and judgments you make.”
Consider the problem of getting people to save for retirement. Focusing on automaticity suggests that making it easier to save could cause a shift in behavior. Indeed, when a firm in the US simply switched the default savings plan for new employees – automatically enrolling them in pension plans with the easy chance to opt out – savings shot up.
Thinking Socially: Imitate Behavior
Thinking is conditioned by social context, role models, and the salience of social identities. We may look to other people’s behavior for guidance in deciding our own behavior.
A campaign with stickers in mini-busses in Kenya proved how effective adopting this principle can be. Drivers drove recklessly and caused many accidents. Stickers were put in the bus urging passengers to speak up against reckless driving, and accident rates with those buses plummeted. The bus stickers changed something in the environment. The seemingly trivial change of posting a sticker transformed the behavior of the drivers and encouraged the passengers to raise their voices.
Thinking with Mental Models: Question the Status Quo
In order to make sense of the vast array of information in their environment, people draw on conceptual tools such as categories, schemas, and taken-for-granted worldviews that they have absorbed from experience and from exposure to others. With these cultural tools, people can usually quickly interpret and derive meaning from the situations they encounter. The institutions in the environment shape how people think and the alternatives they can imagine. Mental models often become naturalized: some categories, social identities, and patterns are seen as natural or inevitable even though other perspectives are possible, perhaps preferable, and often even ones that prevail in other communities.
Gender issues are a good example of that. In West Bengal, India, change occurred after a program of affirmative action. Women were enabled to take leadership positions and after seven years’ exposure to women leaders in their villages, men’s bias in evaluating women in leadership positions was gone.
The traditional perspective on rational and unbiased people remains central for policy design. Yet, it is proven that including automatic and social thinking as well as changing the mental models activated by people’s environments can make policy significantly more effective. This is why I strongly encourage policy-makers to widen their perspective and take behavioral aspects more strongly into account.
For more details on experiments and studies on behavioral interventions designing policy check the World Development Report 2015 at the World Bank website.
You can read the complete solution of Karla Hoff as part of the GES 2015 Selected Solution Proposals (PDF, 3.7 MB)