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behavioral economics

The things we do: The connection between sleep and poverty

Roxanne Bauer's picture

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? 

YA woman naps on a hand cart, used for hauling goods around the crowded streets of Mumbaiou’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).

The things we do: How our competitive natures may help reduce our carbon footprints

Roxanne Bauer's picture

adjusting a home thermostat to save energyIn 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.

Reframing and other “small miracles” for development

Allison Demeritt's picture
In a famous psychological experiment, subjects are shown a basketball video, about a minute long, and are asked to count the number of passes made by the team wearing white. Thirty seconds into the video, a woman in a black gorilla suit enters stage right, walks to the middle of the screen, pounds her chest, and then exits stage left. How many of the viewers noticed the gorilla? It’s tempting to predict that all of them did. But in fact less than 50% of video-watchers report seeing the gorilla (Simons and Chabris 1999). How do such oversights happen? And can the experiment tell us something about development?  
 
Selective attention test

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.


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