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behavioral economics

The things we do: How a simple text message is the difference between success and failure

Roxanne Bauer's picture

A woman and her child get the anti-malaria drugs distributed in Freetown.Mobile phones are increasingly prevalent throughout the world, and researchers have found that sending text message reminders can help people follow-through with their intentions, significantly increasing the success of development interventions.

“People need to be reminded more often than they need to be instructed.”

These are the wise words of Samuel Johnson, an English author, critic, and lexicographer.  Even though he lived more than 200 years ago, international development interventions are proving him correct today. 
 
Reminders for Malaria
 
It’s widely known that failure to adhere to a full course of antibiotic treatment results in treatment failure can also encourage bacterial resistance to antibiotics, threatening the sustainability of current medications. This is extremely important for malaria, which, according to the World Health Organization, results in 198 million cases each year and around 584,000 deaths.  The burden is particularly heavy in Africa, where around 90% of call malaria deaths occur and in children under 5 years of age who account for 78% of all deaths. Low rates of adherence to artemisinin-based combination therapy (ACT) treatments has led to prevalence of antibiotic-resistant Malaria in many parts of the world, particularly Africa.  One of the biggest and simplest reasons why people fail to complete the full treatment for Malaria is that they forget.

Behavioral economics, jobs and development – an interview with Dan Ariely (part 2)

Dan Ariely's picture
How can the study of behavioral economics and psychology help us generate more, better and inclusive jobs? In this two part interview, Professor Dan Ariely of Duke University outlines how we can use insights from behavioral economics to make a positive impact. He describes how to make job hunting less demoralizing and how to improve the prospects for those already in work. He also looks at the ways in which the World Bank can operationalize the findings of last year’s World Development Report. Finally, he reveals the fascinating results of a study conducted alongside the Jobs CCSA in Kenya, aimed at encouraging saving in the informal sector.
 

The things we do: Nudging people to give

Roxanne Bauer's picture

Man delivers gas cylinders in IndiaIn an appeal to civic duty, the Government of India is asking citizens to forgo a gas subsidy they receive so that gas cylinders can be transferred to the less fortunate. To encourage Indians to "Give It Up," the government called on business leaders to set an example and made the procedure extremely easy.

India recently launched an ambitious cash transfer program to help small businesses and households buy fuel.  Under the plan, consumers of liquefied petroleum gas (LPG), commonly referred to as propane or butane, receive a cash subsidy in their bank accounts to buy gas cylinders at market price.

Once joining the scheme, the subsidy, which is equal to the difference between the current subsidized rate and the market price, is transferred to the consumer’s bank account when he/she orders a cylinder.  Another transfer is then provided at the time of delivery of the cylinder. 

Last November, the Direct Benefit Transfer Scheme for LPG was rolled out across 54 districts, with the rest of the country participating by January 1 of this year. 

The scheme was launched by India’s previous UPA government in June 2013, but it was abruptly stopped earlier this year following court orders.  It has since been modified to exclude the requirement of providing a unique identification number (Aadhaar) to avail the cash subsidy.

The idea behind the direct benefit transfer is that it can ensure that the subsidy meant for the genuine domestic customer reaches them directly and is not diverted. The Government of India hoped to save millions each year by curbing diversions and leakages in the system but also to ensure efficient delivery of subsidies to the target beneficiaries— the consumers.

Behavioral economics, jobs and development – an interview with Dan Ariely (part 1)

Dan Ariely's picture
How can the study of behavioral economics and psychology help us generate more, better and inclusive jobs? In this two part interview, Professor Dan Ariely of Duke University outlines how we can use insights from behavioral economics to make a positive impact. He describes how to make job hunting less demoralizing and how to improve the prospects for those already in work. He also looks at the ways in which the World Bank can operationalize the findings of last year’s World Development Report. Finally, he reveals the fascinating results of a study conducted alongside the Jobs CCSA in Kenya, aimed at encouraging saving in the informal sector.
 

 

Uncovering implicit biases: What we learn from behavioral sciences about survey methods

Sana Rafiq's picture
Last year, I was in Nairobi, Kenya, along with some of my colleagues from the World Development Report (WDR) 2015, Mind, Society, and Behavior. We were there to set up the data collection efforts for a four-country study. One of the goals of this study was to replicate results from lab experiments that suggested poverty is a context that shapes economic decision-making amongst households.

The things we do: The entourage effect

Roxanne Bauer's picture

Members of the Association Culture et Developpement de Kasserine (ACD) “Culture and Development Association of Kasserine”Psychological research explores a phenomenon known as the "entourage effect"in which allowing individuals, referred to as VIPs, to share otherwise-exclusive privileges with a circle of friends, elevates the status of the VIP.

Economists and marketers alike have known for a long time now that the perceived status of a product has a tremendous impact on sales and who the customer base is. The basic economic reasoning is that the scarcer a product or service is, the more valuable it is perceived to be. The scarcity or exclusivity of the product or service signals its status.

Research on this topic, however, highlights the ultimate form of status: the entourage.

Brent McFerran of the University of Michigan, Stephen M. Ross School of Business and Jennifer Argo of the University of Alberta, Department of Marketing, Business Economics, & Law published a paper in September 2012 called the “The Entourage Effect” in which they demonstrated that when an individual earns or wins a reward, they enjoy it more if they can share it with people they like. This individual, referred to as the VIP because a priviledge has been granted to them, gains status from the act of sharing.  The authors write, “the presence of others (i.e., an entourage) alters a VIP's personal feelings of status.” In particular, they show that “VIPs feel higher levels of status when they are able to experience preferential treatment with an entourage, even if this results in the rewards associated with the treatment becoming less scarce.”  Even though VIPs are sharing their reward, reducing its exclusivity, they nonetheless feel higher levels of status.

Experiencing development: fast cars and fast cash

Bilal Zia's picture
In a new paper published in the World Bank Working Paper Series: “Debiasing on a Roll: Changing Gambling Behavior through Experiential Learning” (WPS #7195, February 2015), my co-authors and I study how we can start using insights from the biology of the human mind to better understand and facilitate learning of key development concepts especially among illiterate populations in poor countries.

The Things We Do: How Crowd Science Can Help Eliminate Biases

Roxanne Bauer's picture

There is a new and exciting field emerging that combines the insight of analytics and psychology; it’s known as crowd science.  Already, it’s a fairly pervasive industry, involving not just data scientists but also behavioral economists, marketers, and entrepreneurs.
 
Crowd science analyzes data (through mining, algorithms, statistical modeling, and others) and then applies psychological or behavioral theories to make sense of the analyses. It is sometimes referred to as the “guinea pig” economy because it utilizes consumer tests— often without the consumer realizing it— to obtain its data and, therefore, insight.
 
One of the most popular forms of crowd science is A/B testing whereby website visitors are shown different interfaces or versions of the same site. The way in which each visitor navigates through the site is then tracked to determine which version is more appealing or effective. One reason A/B testing is so helpful is that it divides users into a control group and a treatment group, allowing the engineers of the experiment to determine not just what the issues are but how to solve them. It also allows decision-makers to test for biases in project design and implementation.

Human Nature is Not Always Rational- How Behavioral Science can Aid Development

Paolo Mefalopulos's picture

I am not sure if I was more surprised, glad, or excited to see the recent 2015 World Development Report published by the World Bank Group. Knowing well this institution, I admit I did not expect to see the day when it would acknowledge that human behavior is not necessarily guided by rational considerations and that behavior change is not a linear process and needs to reflect the complexity of factors affecting such process. The possibility that rational thought is not at the basis of every human action is something quite revolutionary, at least within the mainstream boundaries of economic discourse.

The WDR entitled “Mind, Society and Behavior” seems to suggest that economists might actually have something to learn from behavioural scientists! However, such concepts have been floating around for a quite some time. A handful of social scientists, development scholars, and practitioners have been exploring, advocating, and applying to a different degree principles, which are now illustrated in the WDR and applying approaches that promote human agency and facilitate social change.

Quote of the Week: Cass R. Sunstein

Sina Odugbemi's picture

“Public figures are ordinarily rewarded for what they say, not for what they don’t. Grace is an underrated virtue; gracelessness is an insufficiently acknowledged vice.”

- Cass R. Sunstein, an American legal scholar and author. He taught at the University of Chicago Law School for 27 years and is currently the Robert Walmsley University Professor and Felix Frankfurter Professor of Law at Harvard Law School. Sunstein also served as the Administrator of the White House Office of Information and Regulatory Affairs in the Obama administration. He is the author of numerous books on legal philosophy and co-authored, with Richard Thaler, Nudge: Improving Decisions about Health, Wealth, and Happiness (2008).
 


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