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World Bank Calls for Development Policy “Redesign” around Human Behaviour

WASHINGTON, Dec 4 2014 (IPS) - The World Bank has taken an unusual but highly visible step away from traditional economics, encouraging policymakers and development implementers to place far more emphasis on research into local human behaviour when drawing up plans and projects.

Such a focus would strengthen understanding on the ways in which habits, biases and collective impulses impact on interventions in, say, health, education or encouraging personal savings. The bank emphasises that such a focus is important for understanding the behavioural peculiarities of not just poor communities but also policymakers, including those within the World Bank itself.

“If you know lots of people who pay taxes, you are more likely to pay taxes. That may be as important or more important as the likelihood of getting caught.” -- Varun Gauri, a co-director of the new WDR

These new prescriptions come in the bank’s most high-profile annual study, the World Development Report (WDR), which was formally released here on Thursday.

“[D]evelopment policy is due for its own redesign based on careful consideration of human factors,” the report states, noting that the analysis draws from findings in behavioural economics, cognitive science, anthropology and other fields.

“Because human decision making is so complicated, predicting how beneficiaries will respond to particular interventions is a challenge. The process of devising and implementing development policy would benefit from richer diagnoses of behavioural drivers … and early experimentation.”

The World Development Report is a thematic study, and since its introduction in the late 1970s has generally focused on issues of traditional priority for development policy – jobs, gender, agriculture, etc. Members of the World Bank’s leadership admit that the focus of this year’s WDR – formally subtitled “Mind, Society, and Behaviour” – was a gamble.

Yet they also say that a greater focus on human behaviour throughout the process of creating development policy could have a landmark impact on efficacy, efficiency and other goals that ultimately make the difference between a successful versus middling intervention.

“The use of these methods in the development policy world is very minimal, and all of the motivations for doing this World Development Report were precisely because of that deficiency,” Kaushik Basu, a senior vice president and chief economist at the bank, told IPS.

“So there’s real a possibility of … a paradigm adjustment, whereby governments, development practitioners and others make use of this new range of instruments available to improve delivery to the doorstep. I feel the scope for that is huge.”

Private sector lessons

Traditional economics views human decision-making as straightforward and rational, based on a clean mix of self-interest and logic. Yet the WDR cites copious research over the past decade or more indicating that, in fact, humans arrive at decisions due to a variety of factors, many of which are immediate and unrelated to the broader issue under consideration.

On the one hand, for instance, the World Bank points to research suggesting that poverty and crisis situations make it increasingly difficult for many people to make rational or long-term decisions. On the other hand, the report notes that people can often be “unexpectedly generous”.

The private sector, of course, has known about and directly exploited approaches offered by the behavioural and cognitive sciences for years. Indeed, rarely is a new advertisement or product publicly offered before being extensively considered from a variety of such perspectives.

Yet this is new territory for the bank, and for much of the development world.

“The World Bank is quite dogmatically wedded to the idea of free markets, information about pricing, rational decision-making. So for them to take a step back and highlight the additional information out there that might help remove limitations – that’s very good,” Hans Bos, the vice president and director of the International Development, Evaluation, and Research (IDER) programme at the American Institutes for Research, told IPS.

“What this report didn’t do very well is to explain the practical implications of following these approaches. In order to really know what is working in a local context you need to keep testing things, but we can’t spend three-quarters of the development budget on research. So we need to come up with a better way to do research.”

The World Bank is now hoping that by putting its stamp of approval on this body of research, and by using its global influence, it can spur additional related research. It is also hoping to convince development policymakers to take human behaviour – particularly local behaviour – into account when designing with new projects.

“For example, can simplifying the enrolment process for financial aid increase participation? Can changing the timing of fertilizer purchases to coincide with harvest earnings increase the rate of use?” the report asks.

“Can marketing a social norm of safe driving reduce accident rates? Can providing information about the energy consumption of neighbours induce individuals to conserve?”

This latter issue, of the collective social impact on individual decision-making, is a key one, the WDR’s researchers note.

“If you know lots of people who pay taxes, you are more likely to pay taxes. That may be as important or more important as the likelihood of getting caught,” Varun Gauri, a co-director of the new WDR, told IPS.

“That increase in tax receipts would have a huge impact on development prospects in a number of countries [in terms of] law-abidingness and corruption or other areas where you could have large, paradigm-changing impact.”

Self-reflection

Gauri notes that many of the factors that need to be taken into consideration regarding communities receiving development interventions – their biases, their potential illogic – should also be applied to policymakers designing these interventions.

“A lot of the findings that have been conducted to date focus on households and consumers and their choices. But these findings apply to everybody, including to policymakers themselves,” Guari says.

“So to the extent that these findings can have a huge paradigm-shifting impact, it may be as a result of policymakers themselves thinking through their own biases, thinking through the cognitive illusions they’re under before they make policies for an entire country.”

This self-reflexive tone is welcome, the American Institutes for Research’s Bos says. Indeed, he suggests it should have been the report’s primary focus.

“I think this report would have been far more powerful if it had started with analysis of [the World Bank’s] own practices,” he says.

“Often it’s much easier for us rational donors to change how we do our business than it is to go into a poor country and tell them how to do things differently. Starting with ourselves would be a far better way of applying these lessons.”

Edited by Kitty Stapp

The writer can be reached at cbiron@ips.org

 
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