Classical economics would have us believe that human beings are willful, selfish, have perfect foresight and are endowed with uber-human cognitive abilities. While such assumptions were meant to keep analyses of human behaviour simple and tractable, with time they were accorded the status of the gospel. But then came the heretics: Daniel Kahneman and Amos Tversky. With their formal training in psychology, they showed, through a series of experiments, that human beings frequently violate the axioms of classical economics. That made way for a more psychologically nuanced and empirically grounded counterpoint to the rational beings or homo economicus, namely homo behaviouralis. Kahneman was awarded the Nobel prize in 2002. Unfortunately, by then Tversky had moved on.
Although homo economicus has not completely given way to homo behaviouralis, psychologically nuanced behavioural agents, as opposed to rational agents, are making their presence felt in finance, marketing, and most of all, public policy. The intellectual foundation of a psychologically informed public policy came from Richard Thaler and Cass Sunstein, authors of Nudge. Nudge means a gentle prod aimed at leading people to do certain things or not. For example, realising the powerful role that default plays in our life, many universities have set “print on both sides” as the default print mode — a subliminal intervention which helps save paper.
Thaler and Sunstein showed that by creating a subtle change in the choice architecture, it was possible to help people move away from suboptimal or bad choices. If we agree that having fries when a salad is available, is indeed suboptimal, then tweaking the choice architecture by placing the salads first and fries at the very end of the food queue may help people make healthier choices.
The idea that choice architecture can be tweaked is termed as Libertarian Paternalism. Why paternalism? Because someone else decides that salads are healthy but fries are not. Why libertarian? Because both salads and fries are still available on the menu. As it turns out, Nudge is a powerful tool to influence human behaviour. The British academic-bureaucrat David Halpern was quick to realise this and he founded the Nudge unit (formally the Behavioural Insights Team (BIT)) in 2010. Some initial skepticism notwithstanding, the Nudge unit has risen in popularity and is the driving force behind UK’s actionable behavioural-insights-driven public policy. BIT has helped the government raise tax revenue by sharing information about how many of the defaulters have complied. They have shared
neighbours’ adoption rate of green technologies to encourage people to do the same. Today, BIT’s interventions are being used in a range of problems in the health, education and the larger public sector. Nudge units have now been set up in the US, Australia and Singapore.
Niti Aayog is in the process of setting up India’s first such unit, aimed at helping people and government make behaviourally informed decisions. The scope of using the frailties of human psychology to help change behaviour and transform habits and biases may provide the government a cheap albeit important lever of governance. Here
are some potential nudges which we believe can transform Indian urbanscape: Cheap cylindrical equipment (at levels equaling the average male height) that look like cameras may be installed along streets without toilets.
Signboards that report the distance and direction to the next public toilet can help Swachh Bharat. Government buildings may paint their walls with images of cultural and social icons. The possibilities are indeed endless.
Two important caveats that must be in place: One, for an intervention to qualify as nudge, it should be cheap and easy to implement. Two, nudges, almost always, are context specific. What works as a nudge in a western country may not work in India. Even what works in Rajasthan may have absolutely no effect in Mizoram. To design a successful nudge, one needs an understanding of the context and a keen insight into how our mind works. Without this, we may end up as the Brits did in Vietnam — where a reward for a dead rat’s tail led to increase in tailless rats.