Economists + Policy makers [Part II]

Note: This is a continuation of an earlier article, economists + policy makers [part I], it is best advised to go through, just to get a hang of things.

The policy implication is that we need to support decisions when people make them under times when their cognitive bandwidth is depleted. We try to move the decision out of periods when their bandwidth is less scarce. One example of this is from Columbia where there is a conditional cash transfer program for parents when they send their kids to school. As one variant to the program they held back one-third of the transfers and gave them lump sum with interest right before school decisions were made. They changed the timing and this had an impact on enrollment because people could have saved the money each month but it was hard to remember the same. But if you give them the money all at once it is easier to enroll your kids in school.

Implications for India and policy makers generally is that a policy tool kit is much wider than they typically think. You typically think that if you want to get people to do something we provide resources and information. That’s fine we should keep doing that. It is important. But it is really crucial to also think about mindsets. In the context of sanitation we need to think about how for Swatch Bharat the key idea is behavior change. You have to get people to use the latrines. It’s not enough to give the resources and information. We need to do that. But we need to be thinking about what is the mindset with respect to sanitation. Why would a person use a latrine versus going outside in public. That’s partly a social norm. You have to build a new social norm. We have to think about the model of what causes diseases. People have a mindset about what causes diseases. They may be wrong about it. You can address that they may change their behavior. That’s the key idea.

Typically we say things like let’s build financial institutions let people decide how much to save for themselves, how much to save for their daughters’ education, how much to save for health emergency, how much to save for their retirement perhaps. Then Government steps back. It says you decide but some times that’s not enough. We can change the choice environment to help people make better decisions for themselves. People have a hard time remembering they have to save if they are poor. Or if you are trying to change your behavior, you want to make the right choice but it is hard to follow through. So to reap the benefits everybody has to do it together. If you all have to stand and declare, that is another way to do it. Social norms have two components, the first is the statement that you ought to do something. The second is the fact that many people are in fact doing it. There’s a great experiment on drinking (not water of course) in the Princeton University campus in which students were asked how much other students drink and they overestimated how much other students were drinking. Then, they randomly told some people, exposed them to the idea that in fact other people are drinking less. Then six months later these people themselves started drinking less. So people want to fit in. With sanitation or Swatch Bharat if you can show many other people are starting to change their behavior they may start to change their behavior because this will generate a new social norm. So when we do the monitoring and evaluation in Swatch Bharat we need to think of not only as monitoring and evaluation but a feedback mechanism to people to show that in fact the norms are changing. That itself is a potential intervention. Then, we also need to think about the messaging. We need to make sure we tell people what to do not just what not to do.

“If we build it, they will come”!!

PS: To browse other Indian Economy related articles, click here.

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