Tag:GS3 || Economy || Introduction to economics || Basic concepts

Why in news ?

The Economic Survey 2019 has drawn on Nobel Laureate Richard Thaler’s Behavioural Economics Theory to lay out what it describes as an “ambitious agenda” for behaviour change that will bring in social change, which in turn, will help India transit to a $5 trillion economy by 2024-25.

What is Behavioural Economics?

Behavioural economics is a method of economic analysis that applies psychological insights into human behaviour to explain economic decision-making .

. In reality, decisions made by people often deviate from the various theories of classical economics. Drawing on the psychology of human behaviour, behavioural economics provides insights to ‘nudge’ people towards desirable behaviour.

The US academic Richard Thaler has won the Nobel prize in economics in 2017 for his pioneering work in this field.

What are the learnings of the economic survey on Behavioral Economics?

A key principle of behavioural economics is that while people’s behaviour is influenced significantly by social norms, understanding the drivers of these social norms can enable change. In India, where social and religious norms play such a dominant role in influencing behaviour; behavioural economics can, therefore, provide a valuable instrument for change.

In India, where social and religious norms play such a dominant role in influencing behaviour; behavioural economics can, therefore, provide a valuable instrument for change. Many Indian schemes that employ insights from behavioural economics have met with success. For example :

: The Swachh Bharat Mission (SBM) and the Beti Bachao, Beti Padhao (BBBP) scheme, Give it up (LPG subsidy).

The Survey, therefore, lays out an ambitious agenda for behavioural change by applying the principles of behavioural economics to several issues, including gender equality, a healthy and beautiful India, savings, tax compliance and credit quality.

How Behavioural Economics can be applied in the Indian context?