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Interviews | Varun Gauri, Senior Economist, Development Research Group at the World Bank, interviewed by Anjuli Bhargava
Varun Gauri, Senior Economist, Development Research Group at the World Bank, interviewed by Anjuli Bhargava

Varun Gauri, Senior Economist, Development Research Group at the World Bank, interviewed by Anjuli Bhargava

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published Published on Jun 17, 2015   modified Modified on Jun 17, 2015
-Business Standard

The World Bank's latest report "Mind, Society and Behaviour" calls for re-designing development policy based on a more realistic understanding of how human beings think and behave. The lead author of the report, Varun Gauri, was in New Delhi and spoke to Anjuli Bhargava on the thinking behind the report and what India can do with it. Edited excerpts:

* Right from the cover design to the title, this report seems like a departure from the usual approach of World Bank reports replete with data and numbers. What is the thinking behind this focus on the mind and behaviour?

Development policy is due for a redesign, based on a more realistic understanding of how human beings think, decide and behave. In the standard approach, government provides information, resources and taxes, or subsidies, and then stands back. In the area of savings, for instance, the government says we have set up these financial intermediaries like banks and so on and you decide for yourself how much to save - for say, the education of your children, your medical emergencies, your old age and so on.

It's a powerful approach but it is incomplete since sometimes people need some guidance. You don't necessarily know your own future very well. You may not anticipate all your needs in the future. There may be a divide between intention and action. We procrastinate. We get tired. We get distracted.

People are not as rational as the standard approach assumes. Now, we have evidence that shows that people are not only irrational but they are predictably irrational. We also know people are going to forget. If we know this, we can design policies that work around this forgetfulness.

Similarly, we know that people are going to be influenced by their neighbour's, or the societies that they function in. So, we can think of policies that leverage social contacts to make a change.

In terms of timing, there has been a gradual change in thinking of how to best design policies keeping in mind these factors. Policies have been designed of late keeping how people behave in mind…and have been quite effective.

* Can you give me an example?

The classic example is retirement savings. Most formal sector workers do not save for their retirement. If you join a company and it says we will match your savings, most people say "oh retirement is very far in the future. I don't want to think about it". But if you automatically enrol people in such a savings plan, that is more powerful than a 50 per cent subsidy in terms of its impact on savings. Even an offer of a 50 per cent subsidy may be less effective in getting people to save than the automatic enrollment. People tend to go with the flow.

Take the case with organ transplantation in Europe. In Germany, you are automatically an organ donor unless you specify that you don't want to be an organ donor so the consent rate is over 90 per cent. In Austria, with a very similar culture, the consent rate is 10 per cent, as you need to specify if you want to be an organ donor.

* The German approach seems a lot better…

That's right. Looked at from a public health perspective, it is. You have a lot more organs available and can save more lives.

These are rich country examples but we are beginning to see examples in developing countries too…

* Like?

Like text messages as reminders have been quite powerful. In Kenya, for instance, there were text messages sent by an NGO to people to remind them to take their HIV medicines. Despite the fact that lives are involved, not everyone would comply. Some forgot. At baseline, people were complying 41 per cent of the time. With these text messages, compliance went up to 53 per cent.

There was a programme in South Africa on healthy eating in which the health scheme also gave people credit cards. A 25 per cent money back was promised whenever they consumed, or bought healthy foods. On the credit card, you could see what was purchased and certain foods qualified. The health insurance company was involved too since it had an interest in ensuring that people ate healthy. There was no payoff; only a downside. If you increased your healthy food consumption by 5 per cent, you would get 25 per cent of your money back. So people who were more sophisticated about their eating habits, or conscious of eating healthy signed up for this and it was found that six months later, they were still eating healthy. So you had managed to change habits in a way.

* How did the team at the Bank chance upon, or decide to focus on this? Was it your individual work as economists brought together?

There is a team of behavioural economists at the Bank. But there is a larger realisation that economics is changing and is incorporating psychological insights.

Decision-making is influenced strongly by psychological factors and these behavioural social insights can help design better and more effective policies. So far, it has been more restricted to rich countries but slowly it is becoming more mainstream.

Richard H. Thaler - one of the authors of Nudge - is one of the leading economists who has worked in this area. There are now behavioural insights teams in governments around the world based on this - Nudge teams in the USA, UK, France, Netherlands, Germany but now even Singapore and Malaysia.

A Nudge team is now being set up in the research unit of the Bank so the Bank will help project teams use behavioural social insights to design more effective interventions.

* What to your mind can India do with this?

Let's take Swachch Bharat. A key part of it is behaviour change. You can build toilets but you also need to get people to use them. How do you do that? You have to change lifelong habits. Now, why would you change your behavior if no one else is doing it? The health benefits of building more toilets accrue if lots of people do it; not just you.

So, to get people to change you need to work at the village level and it has to be collective. Of course one standard approach is to keep repeating the message - this is healthy, do it. This is healthy, do it. But just giving people information may not be enough.

Then, in some places, people have placed faeces in a particular spot and let the flies come around. You may know this is what will happen but when you see it, some may change their behavior. Then, the village can collectively resolve to do it or village declares that girls from their village will only marry boys from open defecation-free villages and so on.

Sometimes, people ignore information and sometimes if they disagree with it, it makes them even more extreme in their views. In the US, there is a study of measles - some people think the measles vaccine can cause autism. Now, when they were given data to show how this was not true, they became even more stubborn. They have a mental model and plain information is not enough.

In India, road safety is an issue. This is also about behavioural change. How do you get truckers to invest in maintaining their trucks better? What about seat belts? Drinking? Pedestrians walking in the wrong places. You can use some of these insights to change their behavior.

In South Africa, people are over-confident about how they drive and their driving skills and they are also overconfident of winning a lottery. So the authorities gave people a lottery ticket for not getting a traffic violation. This single act cut road fatalities by half. People were suddenly motivated to stick to the rules since they felt they would win the lottery.

What I am saying in effect is this: there are more policy tools than we think. Policy makers think they have information, resources, taxes and subsidies but we also have making information salient, commitment devices, role models, social networks - basically there are other ways of getting things done. Options available before governments are more varied than we thought and some of these are quite cost effective. So, governments need to take these behavioural social insights into account when they design policies.
 
 
Image Courtesy: Business Standard

The Business Standard, 16 June, 2015, http://www.business-standard.com/article/economy-policy/govts-need-to-account-for-behavioural-insights-while-designing-policies-varun-gauri-115061601363_1.html


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