The Future of Policy

In the last decade, psychology has become immensely popular thanks to a series of bestsellers by erudite writers and researchers. Thinking, Fast and SlowYou’re Not So SmartNudgeThese books show that we don’t occasionally deviate from rationality. We make the same mistakes over and over. Aristotle wrote that humans are the rational animal–but he was wrong. We’re predictably irrational.

Ironically, we tend to absorb these books uncritically, treating biases like a broken limb—something to fix and forget. In reality, a bias is more like chronic back pain: it won’t go away but we can make adjustments. Better yet, a bias is like severe short-term memory loss. It won’t go away and we don’t even notice it. Some research extols the benefits of alerting people to their mistakes, but the effects are usually temporary. We invariably return to feeling error-free.

How can we avoid irrationalities if learning about them doesn’t seem to help that much? The wisdom of management initiatives like Six Sigma is that they improve individual behavior by redesigning the environment. Reducing errors (or creating a new habit) requires a similar approach. Instead of telling people to avoid errors, we should focus on context.

This new approach, which takes advantage of our irrationalities to enact change, is beginning to influence public policy. Last month The World Bank issued a report, “Mind, Society and Behavior,” that outlines how psychology is helping alleviate global development and health problems.

In India, for example, sugar cane farmers typically receive their income in one lump sum, at harvest time. Before harvest, when farmers worry about debt, they score significantly lower on cognitive tests compared to the weeks after. They are more likely to take loans (99 versus 13 percent) and pawn belongings (78 versus 4 percent) before harvest. The report urges that programs designed to assist poor farmers should “pay more attention to the timing of decisions and prevent them from coinciding with times when beneficiaries’ cognitive resources may be heavily taxed.”

Also in India, researchers used stereotype threat—which occurs when people perform worse after being reminded of negative stereotypes about themselves—to boost student performance. When the researchers downplayed the salience of caste in one experiment, low-caste boys solved as many mazes as high-caste boys. When the researchers emphasized caste in mixed classrooms, low-caste boys solved fewer mazes.

Britain’s Behavioral Insight Team (also known as the “Nudge Unit”) is using the power of social norms to encourage on time tax payments. They sent letters to taxpayers that contained messages such as “9 out of 10 people in Britain pay their tax on time.” The strategy led to a 15 percent increase of taxpayers who responded with on time payments.

When Denmark banned indoor smoking, smokers began to smoke just outside of buildings. This shift caused secondhand smoke to seep back into the terminal at Copenhagen Airport. Clearly marked non-smoking zones placed near entrances weren’t working, so officials moved benches and trashcans (where smokers congregated) further away from the airport entrances. The small change cut smoking near entrances by 50 percent.

After a tunnel supplying fresh water to Bogota burst in 1997, the city government declared a public emergency and asked residents to reduce usage. Residents subsequently increased consumption—some even began stockpiling water—so the government publicized information about which residents were cooperating and which residents were not. The CEO of the water company personally awarded households that saved; local celebrities used the media to create a social norm of water conservation. “By the eighth week of the campaign, citywide water savings had significantly exceeded even the most optimistic technical predictions.”

In Kenya, health officials increased the rate at which patients took HIV drugs by sending weekly reminders via text message. In another study, researchers gave one group of Kenyans a lockable metal box, a padlock, and a passbook to encourage investment in preventative health care products, such as insecticide-treated mosquito nets. Investments subsequently rose by 66–75 percent.

South Africans improved financial literacy by partnering with a television soap opera. “Households that watched the soap opera for two months were less likely to gamble and less likely to purchase goods through an expensive installment plan.”

The brilliance of these initiatives is they assume, correctly, that human beings don’t always respond to information rationally. Instead, they begin with the premise that we’re social creatures swayed by norms, sensitive to stereotypes, and influenced by the cognitive pressures of poverty and small changes in the environment.

Psychology provides cheap and powerful solutions to complex problems. Instead of contemplating policy from the armchair, we must observe how humans actually behave. That, at least, is my hope for the future.

Sam McNerney