A World Bank report urges the use of new insights into the way people think and decide

HERE’S a new message from the World Bank: Development policies are more effective if they’re formulated with a firmer understanding of human behaviour. Not quite an eye-opening revelation, is it, especially when it’s the thrust of a report that goes on for more than 200 pages?

Then again, the World Development Report 2015: Mind, Society and Behaviour, issued on Tuesday, is not meant to be reduced to a single sentence.

It is, in fact, a call for a redesign of development economics and policy, using new insights into how people think and make decisions.

According to the bank, recent research from various disciplines (such as neuroscience, cognitive science, psychology, behavioural economics, sociology, political science and anthropology) can help diagnose and solve the psychological and social factors that influence development.

Coupled with the standard economic tools, these new approaches will make it easier to deal with difficult development challenges such as increasing productivity, breaking the cycle of poverty, and acting on climate change.

Current development policies, the bank argues, are flawed because they operate on the notion that people carefully weigh their choices, consider all readily available information, and make decisions on their own. We all know that’s not always the case.

If it were, achieving development goals would simply be a matter of employing subsidies and publicity to stimulate activities that boost the economy, and imposing taxes to curb the undesirable activities.

To expand on what it’s advocating, the bank has come up with a framework built on what it calls three principles of human decision making: thinking automatically, thinking socially, and thinking with mental models.

“People think automatically. When deciding, they usually draw on what comes to mind effortlessly. People also think socially. Social norms guide much of behaviour, and many people prefer to cooperate as long as others are doing their share. And people think with mental models. What they perceive and how they interpret it depend on concepts and worldviews drawn from their societies and from shared histories,” it explains.

But what can the development community (governments, international agencies, development professionals and non-governmental organisations) do with this knowledge?

“Understanding how people make choices doesn’t help just those who sell bars of soap or new cars. It also can help us in the field of development become more effective in delivering programmes to the poor and vulnerable,” says World Bank president Jim Yong Kim.

“In the case of Ebola, for instance, we must tackle stigma, inaccurate understanding of disease transmission, mistaken panic, and other biases and misconceptions. Having a deeper understanding of how people think can ensure that we improve our responses now and in the future, whether in tackling an epidemic or in taking on a global challenge like climate action.”

Because interventions should take into account psychological and social influences, says the bank, the process of designing and implementing effective interventions needs to become a more iterative process of discovery, learning, and adaptation. “What matters is not only which policy to implement, but also how it is implemented,” it adds.

It also reminds experts, policymakers, and development professionals to recognise that they too are prone to the three principles of human decision making, that is, they are just as likely to be subject to social and cultural influences, and to think automatically.

Says the bank: “They tend to select and filter evidence in ways that confirm their prior views. Their social contexts can lead them to misunderstand how people living in poverty make decisions and behave. They need to become aware of their own biases, and development organisations should implement procedures to mitigate the adverse effects of these biases.”

The authors of the report have turned to a wide range of studies and statistics to get their points across.

Colombia, for example, was a fertile ground for illustrations of how human behaviour can determine the success or failure of government initiatives. In an experiment there, a cash transfer programme to encourage school attendance was tweaked so that part of the funds was given as a lump sum at a time when decisions about school enrolment for the next year were made. Originally, the families had been paid every two months.

As a result of the adjustment, enrolment increased without a decline in current attendance. This indicated that the right timing of a programme can get the people to cooperate in the pursuit of development goals.

In Kenya, after small stickers were placed in buses to urge passengers to “heckle and chide” reckless drivers in Kenya, annual insurance claims rates for accidents declined from 10% to 5%.

The report also highlights the impact of entertainment education. For instance, messages on debt management and gambling were incorporated into the story line of a two-month-long popular soap opera in South Africa.

A study found significant improvements in content-specific financial knowledge, greater likelihood of borrowing formally and for productive purposes, reduction in borrowing through expensive shop credit, and lower propensity to gamble. It’s interesting as well that financial messages delivered by a peripheral character in the TV show were largely ignored.

There are numerous other examples of how innovative approaches to development can make a difference. It’s about caring and thinking hard enough so that problems can be identified and solved. And yes, understanding how the rakyat think and make decisions certainly matters.

And as the report points out, policymakers are people too, and how they think and decide has an equally powerful impact on the formulation and implementation of policies.

Kaushik Basu, the World Bank’s senior vice-president and chief economist, makes a sharp (and cutting) observation when commenting on the World Development Report 2015, “Standard economic policies are effective only after the right cognitive propensities and social norms are in place. As such, this WDR can play a major role in enhancing the power of economic policymaking, including standard fiscal and monetary policies.

“My only worry is that it will be read more diligently by private marketers selling wares and politicians running for office than by people designing development interventions.”

Executive editor Errol Oh wonders how many people in Putrajaya have read or will read the WDR 2015.