The Subtle Art of Adding Behavioral Insights into the Policy Design Toolkit
Bio of the Author:
Shahmeer is a behavioral economics researcher at PSL University in Paris. His interests include behavioral economics, climate policy, political economy, development economics and macroeconomics. Shahmeer has previously worked at General Electric and the International Energy Agency in their Paris region offices. He has an undergrad in electrical engineering from NUST, Islamabad and his interdisciplinary master’s degrees from KTH, Sweden and INP, France focused on innovation, climate policy, climate economics and energy/environmental engineering. Some of his other writings can be found here. He tweets @shahmeer_mohsin
Content of the Piece:
Policymakers around the world have a plethora of intervention instruments in their toolkits. Sometimes policymakers use strict paternalism, often they would rely on monetary incentives, while on certain occasions they would just go for laissez-faire (the do-nothing policy).
None of these strategies is a silver bullet policy instrument; a certain policy strategy might be useful for tackling a specific problem, while for a different problem, the intended result of the policy and the actual result can be as different as chalk and cheese.
For instance, who knows when slavery would have ended in the United States if left to laissez-faire (the do-nothing policy). Restrictive paternalism was instrumental in ending slavery in the United States. While not too potent in tackling a lot of problems like slavery, laissez-faire can be effective in other situations, for example, if invading another country could cause more harm than good, laissez-faire should be the best way to go.
Around the world, a relatively new policy strategy i.e. behavioral insights-driven policy is becoming more popular and various governments have started to conduct behavioral-insights research to aid the policymaking process. As with other policy strategies, this strategy is not the be-all and end-all solution to all policy problems, but it can be a very useful addition to the policy instrument toolkit.
While public bodies had considered the beliefs and behaviors of citizens in the past while designing policy, in 2010, the UK government established the Behavioral Insights Team, or BIT, the world’s first government institution dedicated to the application of behavioral science to policy. It wasn’t long until other countries followed BIT’s lead and established their own behavioral insights units that utilize various research and experimentation strategies to aid government departments in the policymaking process.
Even Pakistan has joined the bandwagon; the KPK government set up the country’s first Behavioral Insights Unit (BIU) late last year. Other provinces should follow suit, as should the federal government, considering the widespread applications of behavior-driven policy.
There is a staggering number of problems where behavioral insights-driven policy can go hand in hand with other policy strategies or provide better results than the other instruments. For example, governments looking to give an impetus to monetary spending, encourage the population to conserve water, etc can make use of the latest behavioral insights research.
To shift consumption patterns in an economy, there are already extremely potent methods like interest rate changes by central banks. While behavioral economics might not have such powerful tools for changing consumption patterns, behavioral research does give us some insights into various ways in which consumption patterns and behaviors can be related and these insights can be very useful for policymakers. One example of this is the effect of non-cash payment methods on consumption. There are some studies suggesting that people spend more when they use credit or debit cards compared to when they use cash. Various reasons are cited for this behavior including an uptick in impulsive buying tendencies when paying by card. As countries around the world push to transition away from cash, behavioral insights provide useful insights into the upsides and downsides of this transition for policymakers to consider.
Behavioral research from Costa Rica shows the potency of behavioral insights in curbing water consumption. In an experiment in Belén, Costa Rica, peer comparison intimation helped reduce the consumption of water. A brightly colored sticker on their water bills provided people with feedback on their water consumption relative to the average household consumption in their neighborhood. If their water consumption was below the neighborhood average, the sticker had a smiley face and a note of congratulations. Those who consumed more than their average neighbor received a frowny face sticker, along with a special message informing them that their consumption was higher than the neighborhood average. The results showed that consumption fell between 3.5 percent and 5.6 percent for those receiving a social-proof-inspired sticker relative to a control group (group that did not receive feedback). On a large geographical scale like the scale of a country, such a difference can significantly reduce overall national consumption.
Similarly, behavioral insights can be used for various other policy domains ranging from improving tax compliance to increasing organ donation rates to reducing tobacco consumption to improving immunization rates. Because of the widespread applications, the provincial governments and the federal government of Pakistan should pay special attention to behavior insights-driven policy. To better understand the behaviors of the people subject to their interventions and ensure effective policy design for the population, government-affiliated behavioral insights-focused research centers that aid various government departments in designing cutting-edge policy should be established.