“Individually rational behaviour can be collectively irrational. And that’s why the regulators have to do what they can to constrain individual behaviour, so that it doesn’t lead to collectively irrational outcomes.”
Learning to give preference to long-term goals over more immediate ones is known as deferred gratification or patience and considered a virtue in many cultures. However, there is logic behind asking for rewards immediately, and those who live in poverty know this all too well.
The comedian Jerry Seinfeld, once joked “I never get enough sleep. I stay up late at night because I’m ‘night guy’. ‘Night guy’ wants to stay up late. ‘What about getting up after five hours of sleep?’ ‘Oh, that’s morning guy’s problem. That’s not my problem—I’m night guy! I stay up as late as I want.’
Such decisions are described by the theory of intertemporal choice, the idea that decisions have consequences that come at different points in time. People weigh the relative trade-offs of getting what they want in the immediate future with the trouble associated with waiting but potentially getting something better.
We all face these kinds of decisions in our day-to-day lives, from deciding to work now or later or save or spend money, to whether or not we should stay up late to enjoy the night or go to bed early to feel better the next day. In each of these cases, a decision maker needs to assess the utility (or value) of one outcome that is will occur sooner with another one that is more distant in the future.
It’s well-established that a lack of sleep can impair cognitive function and lead to adverse physical outcomes. But is it possible that a lack of sleep can also explain social issues, like poverty?
You’ve probably heard the saying, “Work, play, sleep: pick two.”
Unfortunately, as human beings, we cannot do everything. Turns out, in this constant negotiation, many more people should be picking sleep over work or play.
Researchers have demonstrated that, for most people, sleeping less than six hours a night results in cognitive impairment and a host of other health problems, including increased risk for Type II diabetes and cardiovascular disease. These diseases are also more common among the poor, which leads to some obvious questions: Does poor sleep lead to health problems and lower earnings? Or is it the other way around- that poor health and lower earnings result in poor sleep? Can a lack of sleep explain the income gap?
Freakonomics recently published a two-part podcast on the topic of sleep and how it may affect not just health outcomes, but also the financial outcomes for people. It begins by discussing the puzzle over whether poverty leads to poor sleep (environmental factors, the stress of poverty, or the need to work more than one job may interfere with regular sleep) or whether poor sleep leads to poverty (the impaired cognition that results from insufficient sleep keeps us from earning our full potential).
In order to tackle the adverse effects of climate change in our lifetimes, the global community will need all hands on deck. One software company has found a way of reducing energy consumption by tapping into social psychology.
One way of thinking about how to approach climate change is to divide the issue into ‘wedges’. One wedge would be to increase renewable energy production, another would be to increase energy efficiency in the electric grid, and a third, to make buildings more energy efficient. Along with these other improvements, changing human behavior is another, very important wedge.
Two families that are demographically similar, living side by side, in similar apartments, can use dramatically different amounts of energy— the difference of which can be attributed to behavioral differences.
Keeping up with the Neighbors
These behavioral differences were demonstrated in a famous psychology experiment that focused on home energy use. The research team, led by two psychologists, Robert Cialdini of Arizona State University and Wesley Schultz of California State University, San Marcos, hung a series of five door hangers with energy-saving messages on several hundred homes in a San Diego suburb in 2004. One hanger encouraged people to "join their neighbors" in conserving energy, one appealed to their self-interest to save money, another called on them to save energy to protect the environment, and a fourth asked them to conserve energy for future generations and the benefit of society. A fifth and final message simply stated that summer is here and it’s a time to save energy with no underlying reason.
The researchers measured the effectiveness of the messages by obtaining meter readings before and after the door hangers were distributed. They found that the last four had minimal effect. But the first, which mentioned the neighbors, produced a significant 10% reduction in home energy usage.
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.
In 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.