Rotman Management — Spring 2017

114 / Rotman Management Spring 2017

something by 10 per cent, people will demand less of

it and supply will increase; but when you make some-

thing 10 per cent more salient in an interaction, depend-

ing on the environment, a wide variety of things can

happen. That’s why it is so important to understand the

decision-making context.

Why are insights from behavioural science so well suited

to the policy realm?

Because every policy relies on explicit and implicit as-

sumptions about how people make decisions and why they

do what they do. As indicated, most of those assumptions

rely on the rational, idealized model of how people think.

By embracing behavioural insights, we can redesign pub-

lic policies using new tools, including choice architecture;

social rewards and recognition; the way information is pre-

sented; and activating new social norms.

Your goal is to incorporate behavioural insights into some

of the World Bank’s work. How are you going about this?

We have three main criteria for selecting projects. The first

is, do they address an important developmental challenge?

Areas that address basic human rights are given high prior-

ity. Second, is the initiative ‘owned’ by the World Bank, or a

development partner? That is really important for sustain-

ability and ensuring a long-term impact. Then finally, can

the intervention be evaluated? At this stage of our work,

it’s really important to show that we’re having an impact,

so we look for projects where we can provide some form of

evaluation.

So far, our main areas of work are in tax compliance,

digital finance and savings, education, gender norms and

organizational effectiveness.

Why is this ‘extra work’ necessary?

Because time and again, we find that people have a very hard

time following through on their commitments. We might

want to save more, lose weight, or stop smoking, but we just

can’t follow through because we overvalue the present and

the willpower exertion is too large. Governments often of-

fer programs — from conditional cash transfers to health and

education programs — and are shocked when people don’t

take them up on it. This happens a lot, particularly in the

poorest environments. The question is, why? One reason is

that availing yourself of such programs requires effort and

takes time. Even though in the long run, it makes sense to

take advantage of the program, in the short run, people may

not have the bandwidth to do it.

As a result, all people — rich and poor alike — some-

times make choices that don’t promote their own well-being.

People may also get stuck in habits, succumb to inertia, and

repeatedly procrastinate despite intentions to do otherwise.

There was a study in Morocco in which the government

was providing a credit subsidy for a water hookup. Water

availability is a big problem there: people spend seven to

nine hours each week collecting water, and it is often the

women doing the work. Yet, people weren’t signing up for

the program. The researchers found that the problem was

the ‘hassle factor’ — making time to sign up for the pro-

gram. So, they decided to go directly to peoples’ homes

and get the necessary documentation, and they brought

it to the municipality. The result: the sign up rate went up

from a baseline of 10 per cent to 69 per cent! The implica-

tion is that making things easier for people can have a huge

impact.

Should governments be getting involved in shaping indi-

vidual choices?

I believe they should, for three reasons. First, doing so helps

people obtain their own goals. Reminders to save money

or take medicine help people achieve objectives that they

themselves have set. Research shows that commitment

contracts, which markets under-provide, can reinforce

decisions to adopt beneficial behaviours. Matching the

Development policy is due for a redesign, based on

a more realistic understanding of how people think.