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2-min read

Economic Survey Mentions 'Behaviour' More Than 'Money' and 'Jobs' Combined. It's No Accident

Behavioural models combine insights from psychology, neurosciences and microeconomic theory. Advances in the field over the last decade culminated in the Nobel Prize in Economic Sciences being awarded to Professor Richard Thaler in 2017.

News18.com

Updated:July 5, 2019, 8:22 AM IST
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Economic Survey Mentions 'Behaviour' More Than 'Money' and 'Jobs' Combined. It's No Accident
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New Delhi: There are 176 references to ‘behavioural economics’, or just ‘behaviour’ in the Economic Survey 2018-19. In comparison, the word ‘money’ has been used 31 times, ‘poverty’ 41 times and ‘jobs’ 87 times.

Describing it as an attempt at “unfettered” thinking, the survey argues for leveraging tools of behavioural economics that provide “necessary tools and principles to not only understand how norms affect behaviour but also to utilise these norms to effect behavioural change”.

Simply put, behavioural economics takes different factors, ranging from the psychological to the social and their implications on economic decisions and individuals or institutions.

Behavioural models combine insights from psychology, neurosciences and microeconomic theory. Advances in the field over the last decade culminated in the Nobel Prize in Economic Sciences being awarded to Professor Richard Thaler in 2017.

The survey said that it laid out an “ambitious agenda for behavioural change by applying the principles of behavioural economics to several issues including gender equality, a healthy and beautiful India, savings, tax compliance and credit quality”.

While citing the Swachh Bharat Mission and the Beti Bachao, Beti Padhao campaigns as successful instances of behavioural economics at work, the survey delves into “leveraging the behavioural economics of nudge”.

“A key principle of behavioural economics is that while people’s behaviour is influenced significantly by social norms, understanding the drivers of these social norms can enable change,” it says, and argues that social and religious norms could potentially play a dominant role in influencing behaviour.

“Beneficial social norms can be furthered by drawing attention to positive influencers, especially friends/ neighbours that represent role models with which people can identify,” it says, while adding that people are “given to tremendous inertia when making a choice, they prefer sticking to the default option” and through the near “costless act of changing the default to overcome this inertia, desired behaviour can be encouraged without affecting people’s choices.”

Finally, it adds, “As people find it difficult to sustain good habits, repeated reinforcements and reminders of successful past actions can help sustain changed behaviour.”

Take for instance, the Jan Dhan Yojana, which, as per the survey, “offers tremendous scope to employ behavioural insights” by leveraging default rules to “make auto enrolment into a savings plan the default while offering people the option to opt out”, while making it easy to choose and emphasising on social norms.

It added, “To regular users, even a simple SMS such as ‘You made three withdrawals this month – congratulations’ in the vernacular language, followed by a happy emoticon, may remind people of the norm and sustain their usage of bank accounts.”

It stressed on the need for reinforcement and argued that by “reminding people about the savings that they have done can in the past can help reinforce good behaviour” and made the case for leveraging loss aversion and ensuring that messages match mental models.

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