How Behavioural Economics influence Public Policy?

Revisiting Nobel Prize Winning Economic Theories




For years, generations of economists follow the assumptions of rationality to simplify their economic models. However, individuals sometimes makes irrational decisions which doesn’t comply with the standard of the traditional economic theories. The concept of bounded rationality limits on information, time and abilities prevent people from seeking the best possible outcome. Behavioural economics use psychological, social, and emotional factors to study the decision making behaviour of individuals. This opened the path for behavioural economics to be applied in numerous fields like marketing, political science and public policy.


In the recent Economic survey, India’s economic policy vision document, covered how country’s public policy have leveraged insights from behavioural economic concepts and also provided a roadmap for forthcoming policies to integrate common psychological principles (Tagat, 2019). Nowadays government use nudge theory, a concept in behavioural economics, where human beings need nudge or an encouragement to act a certain way that is best for themselves or society or for the country as whole. Individual rather being forced can be encouraged and influenced to pursue or cease from certain actions through nudges (Kalyanaraman, 2019).


The economic survey explains how nudge were employed successfully in the Swachh Bharat Mission and the Beti Bachao Beti Padhao campaigns.


Swachh Bharat Mission: Launched in 2014 to achieve universal sanitation coverage. It was the first campaign to empathize behaviour change to nudge individuals to construct toilet and reduce the open defecation. The use of local ‘swachhagrahis’ as footsoldiers of the Swachh Bharat Mission drew upon the mind-set of human behaviour to push towards optimistic change (Ministry of Finance, 2019). This resulted in the improvement in Health indicators, diarrhoea deaths among children under five years had reduced significantly in the past four years. A reduction of diarrhoeal diseases death from an estimated 140,000 in 2014 to about 50,000 deaths in 2017-2018 has achieved due to nudging (Roche & Sharma, 2019).


Beti Bachao Beti Padhao (BBBP): Launched in 2015 to address the issue of decline in Child Sex Ratio and related issues of empowerment of girls and women. This scheme launched a 'Selfie with Daughter' initiative to have insights of ‘social norm’ of gender inequality and highly imbalanced child sex ratio. The strategy tend to address ‘failure bias’ which specialises in failures instead of successes because failures get more limelight, people tend to think that failing is the norm, or at least that failing is more prevalent than it really is. Therefore, in this context of BBBP, emphasis was on people who treat their girls equally; this rectifies the failure bias and makes the social norm of fair treatment of girls unambiguously (Ministry of Finance, 2019).


India’s culture, spiritual heritage and social norms plays a significant role in influencing the behaviour of Indians. For instance it has been suggested that Beti Bachao Beti Padhao relabelled to BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi) to improve gender equations in the country, portraying from mythological idols, and social and cultural norms in the country (Kalyanaraman, 2019).


The idea of perception and passions influence the actions of the individuals. Through nudge policies people incline towards desirable behaviour while preserving their right to choose. If people were completely rational they might systematically build same decisions given identical choices, however generally people’s preferences are dependent on how the options are presented to them. Therefore, marketing actions can effectively manipulate the behaviour outcome of the individuals. Indian Government’s different and out of the box approach using psychological and marketing actions bring out the fresh approach to public policy and governance and contribute to successful implementation of policies and schemes to usher social change.




References:

  • Kalyanaraman, A. (2019, July 4). ‘Nudging’ towards positive change. The Hindu.

  • Ministry of Finance. (2019). Economic Survey 2018-19. Ministry of Finace, GOI.

  • Roche, E., & Sharma, N. C. (2019, July 5). Economic Survey sets agenda to bring about behavioural change. Mint.

  • Tagat, A. (2019, July 16). India’s cautious adoption of behavioural economics. Mint.

48 views0 comments

Recent Posts

See All