Policymakers Must ‘Nudge’ To Create Impact
A new science is born.
Finally, behavioural economics, the hybrid amalgamation of psychology and economics is having its day. It is relatively in its infancy but evolving and even striding into better days.
In the 1990s psychologist Robert Cialdini’s idea of ‘social proof’ turned the communication world upside down. Daniel Kahneman, the noble laureate added heft to the idea. Richard Thaler injected ‘nudge’ into every reformist’s lexicon. It takes more than just the ‘demand and supply’ to ‘persuade’ and predict human behaviour. While the brain is the most rational thing in the universe (but) the way it solves problems is ad hoc and very local.
Well-articulated choices wholeheartedly ‘embraced’
Well-articulated choice architecture conveys holistic intentions and is wholeheartedly ‘embraced’. The collateral benefits include higher moral standards and demonstrates trust in the government and creates a fair & just ecosystem. It enhances the relationship between the state and the people.
Our policy framework, especially related to social policies and aimed at welfare suffers several fault lines. Sample this.
The marginal farmers do not benefit from the subsidies. Migrant labourer does not get the promised subsidized food. Even the DBT has leakages. One doesn’t see the much-touted toilets when one needs it. Tobacco consumption is on the rise despite increasing taxes. Free health check-ups are rarely free, never checked. Minimum wages meant to benefit the workers hurts them most. Milk meant for the poor children land up in the sweetshops. Free primary education attracts kids more for the food, less for education. India has the most unequal society despite over 1000 ‘welfare’ schemes. Only 8% of the crops are sold at MSP, and farmers continue to commit suicide. Free immunisation initiatives have fewer takers. Only a fraction of the rich pay income tax. Stricter laws haven’t reduced crime. And revenue maximizing results in ‘minimizing value’. Environment protection messages haven’t worked.
Admittedly, these are good examples of faulty policy design and poor implementations.
Emotion influences decision
But there is more to it. The choice architecture framework has a lot to do with why free immunisation doesn’t work, or why a crime against women is on the rise despite stricter penalties.
The ‘forbid this, force that’ policies have no place in the 21st century democracy, nor in the people centric governance framework. On the other hand, nudges are positive, coaxing, and persuasive. And nudge methods are cooperative, more indirect, less confrontational, tactical, and therefore implementable. Similarly, policymaking must intertwine psychology and the domain that is being addressed to improve engagement and enhance impact.
The ‘choice’ architecture is as important as the design. Communication should be at the heart of the policymaking cycle. A big part of most actions has to do with behaviour. An understanding of how people process evidence and the environment powers effective communication, and ‘shorten’ the last mile.
In the age of information overload, people use heuristic to filter information and make quick decisions, often instinctively and even irrationally. Policy choices must recognise this and frame & ‘tailor’ communication to the condition of the receivers and aligned to their thinking patterns. Similarly, the implementation team must see the world from the perspective of their audience.
‘Nudging’ can be a double-edged sword
The message must be pragmatic, not Machiavellian. Policymakers must be prudent, promote and ensure ethical behaviour. They must also exercise utmost caution as opaqueness in policymaking not only defeats the purpose of ‘nudge’ but also negates the policy altogether.
In a democracy, presenting choice architectures that ‘nudges’ one option over all the others may seem ‘paternalistic’ even perceived as decisions being thrust. Similarly, in a diverse and federal structure with evolving contexts (but) set social norms, a broad generic nudge may not only be ineffective but also unwelcome.
Intangible consequence, tangible costs
Policymaking needs reforms.
Our erudite readers must be aware of the idea of ‘default’ a pre-set option, such as automatic enrolment in the provident fund scheme, or the health insurance programs. ‘Choice overload’ (plethora of options), overwhelms most people leading to unrealistic expectations, decision-making paralysis, and unhappiness. Often crafty policymakers ‘frame’ policies that sets the context and present information to ‘influence’ (mislead) decisions. Similarly, many vulnerable are ‘fooled’ by the ill-intentioned anchoring effect (injecting and establishing a thought that influences actions).
India has over 10 crore tobacco consumers and a 10% death rate. The intangible consequence, and lifetime costs exceeds INR 25 lakhs per smoker. A Crux study across 6 metros insights that increase in taxes reduces consumption temporarily. The same study focussing on the impact of ‘education and awareness’ messages on food labels has scant influence on people marching to healthier alternatives. The study concludes that the ‘indifferent’ awareness campaigns don’t change behaviour. Similarly, ‘forbidding’ the sale of cigarettes, restricting fast food restaurants from operating near schools has not worked either.
Design to deliver, nudge to embrace
Behaviour change brings in sustainable result. A Crux ‘intervention based on behaviour’ with fleet owners (covering 1200 drivers across 180000 trips saved about 20% fuel cost, and reduced carbon emission by 30%.
Key to welfare policy making is innovative design and effective implementation. People must be at the centre of policy making. Welfare must be the bedrock, governance, dignity, equity, and autonomy its pillars.
In a complex & messy political milieu most policies are mired in ambiguous, even abstruse intentions, designed on inherited ideas, and borrowed rationale; compounded by information asymmetry.
Policy design, (especially the implementation) pivoted around ‘nudges’ i.e. mild incentives are impactful and less expensive than the conventional, often orthodox punitive policy options such as penalties, taxation etc
Neither accurate nor desirable
Formulating general law of human behaviour based on the conventional economic theory will neither be accurate nor is desirable.
Policymakers must listen and take note.
Most policymakers have not fully understood the potential of the ‘behaviour’ theory nor appreciate the power of innovative ‘choice’ architecture. Our policy framework needs innovation and scientific tools.
Fortunately, we are seeing green shoots and a welcome departure from the normal. The NITI Aayog has set up a behavioural science unit something that has enhanced policy outcomes in developed economies like the USA and UK.
Policy makers must use behavioural science and robust research to design and implement policies.
