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Behavioral Economics & Intervention Design for Development
Different Questions, New Answers
Saugato Da)a STRIVE Learning Lab London School of Hygiene & Tropical Medicine August 22, 2014
Overview
• What is behavioral economics? • Why does it ma4er for policy and program design? • Some basic behavioral economics insights • Some common behavioral design tools • A note about problem diagnosis • Applica;ons to health contexts • A cau;onary tale… • Ques;ons?
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Behavior
Contexts
Behavior
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ARE WE ALIGNED WITH THE DECISION MAKER?
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STANDARD MODEL OF HUMAN BEHAVIOR
A
B
Decision Actions
Yes
No
Outcome
Yes
No
• We decide yes if benefits > costs
• Action naturally follows from decision
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BEHAVIORAL ECONOMICS COMPLICATES THIS MODEL
A
B
Decision Actions Outcome
Failed to choose,
didn’t consider at all
???
Yes
No
Process
changes
decision
Yes No ???
Yes No ???
Yes
No
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INSIGHT I: ACTIONS NO NOT ALWAYS REVEAL UNDERLYING INTENTIONS
Banerjee, A., Duflo, E., Glennerster, R., and Kothari, D. (2010) “Improving immunisa;on coverage in rural India: clustered randomised controlled evalua;on of immuniza;on campaigns with and without incen;ves.” BMJ 340:c2220
ImmunizaHon rates doubled
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Control Group Immunization camps Camps and incentives
Interventions to Increase Immunization
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INSIGHT II: MANY COMMON BEHAVIORS DUE TO ABSENCE OF FOLLOW-THROUGH
0%
20%
40%
60%
80%
100%
% of farmers in Kenya who said they would use fer;lizer
in next season
% of farmers who ended up using fer;lizer
Farmer IntenHons vs. Behaviors
Duflo, E., M. Kremer and J. Robinson, “Why Don’t Farmers Use Fer;lizer? Evidence from Field Experiments in Kenya,” Working paper, 2010 9
BEHAVIORAL ECONOMICS HIGHLIGHTS A HOST OF PSYCHOLOGICAL FACTORS….
Images taken from youtube video. Illustra;on by Billy Bli4 accessed from www.newyorker.com
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…WHICH HELP EXPLAIN IMPORTANT POLICY-RELEVANT BEHAVIORS
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Low Input
Use on
Farms
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THIS UNDERSTANDING LEADS TO DESIGN IDEAS
©2014 ideas42
HASSLE FACTORS
LIMITED
ATTENTION
PROCRASTINATI
ON
Commitment device
DESIGN IDEA I: INPUT HOME-DELIVERY TO INCREASE FERTILIZER USE
• Home-delivery equivalent to 10% discount on market
price
• Similar results through subsidy would require 50% subsidy “Nudging Farmers to Use Fer;lizer: Evidence from Kenya,” American Economic Review, 101 (6), 2350-‐2390, 2011.
No Delivery Home Delivery
FerHlizer Use with Home Delivery
~50% Increase
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DESIGN IDEA II: REMINDERS TO INCREASE SAVINGS
©2014 ideas42
0
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Pe
rce
nta
ge
In
cre
ase
in
Sa
vin
gs
Content of Reminders
No Reminder
Generic
Reminder
Goal-
specific
Reminder
Karlan, D., McConnell, M., Mullainathan, S. and Zinman, J. (2010). “Getting to the top of
mind: How reminders increase savings.” NBER Working Paper No. 16205
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DESIGN IDEA III: “COMMITMENT SAVINGS” INCREASES INPUT USE IN MALAWI
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5,000
10,000
15,000
20,000
Control Treatment
Inputs Purchased (MWK)
0
50000
100000
150000
200000
Control Treatment
Total Value of Crop Output Output (MWK)
©2014 ideas42
INPUT PURCHASES INCREASED 70%
TOTAL VALUE OF CROP OUTPUT INCREASED 22%
Brune, L., X. Gine, J. Goldberg and D. Yang, “Commitments to save: A field experiment in rural Malawi,” World Bank Policy Research Working Paper No. 5748, 2011.
DEFINE DIAGNOSE DESIGN TEST
REDEFINE
PROBLEM
FIND ANOTHER
BOTTLENECK
STATED
PROBLEM
DISENTANGLE
PRESUMPTIONS
INTERVENTION
CONCEPT CONTEXT
RECONNAISSANCE
BEHAVIORAL
MAP
HYPOTHESIZED
BOTTLENECKS
POLISH
INTERVENTION
DETERMINE
FEASABILITY
INITIAL
EXPERIMENT
DESIGN
ROBUST
EXPERIMENT
Asking the right questions.
ideas42 partner sequential iterative as
necessary
ACTIONABLE
BOTTLENECKS
SCALABLE
INTERVENTION
DEFINED
PROBLEM
consumer
HOW DO WE ARRIVE AT USEFUL INTERVENTIONS?
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DEFINE DIAGNOSE DESIGN
FIND ANOTHER
BOTTLENECK
CONTEXT
RECONNAISSANCE
BEHAVIORAL
MAP
HYPOTHESIZED
BOTTLENECKS
Asking the right questions.
ideas42 partner sequential iterative as
necessary
consumer
BY CAREFUL DIAGNOSIS ...
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TEST
HEALTH APPLICATION I: AGE-DISPARATE SEX & HIV PREVALENCE
0%
10%
20%
30%
40%
Age 19 24 29 34 39
HIV Prevalence By Age and Sex, South Africa
Male Female
30 year old man is ~5x as likely to
have HIV as 20 year old man
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AGE-DISPARATE SEX & HIV: DIAGNOSIS
COMMON DIAGNOSIS ALTERNATIVE DIAGNOSIS
WRONG MENTAL MODEL: Young women think older
men are safer than
younger men.
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AGE-DISPARATE SEX & HIV: EXPERIMENT DESIGN
1. 38 yo M
2. 36 yo F
Game Mockup
TREATMENT GROUP
Control Text
Survey
?
1. 38 yr old M
2. 36 yr old F
Game Mockup
CONTROL GROUP
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AGE-DISPARATE SEX & HIV: EXPERIMENT RESULTS CORRECTED MISPERCEPTIONS RELATED TO HIV PREVALENCE
REDUCTION IN PERCEIVED IDEAL AGE OF PARTNER
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Who is more likely to have HIV?
Control
Treatment
0%
5%
10%
15%
20%
25%
30%
Ideal partner is 3+ years older
Control
Treatment
21 Datta, S. et al. (2014). “Risking It All for Love? Resetting Beliefs About HIV Risk Among Low-Income South African Teens”. Working paper.
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Low incomes, high alcohol consumption
• Earn about Rs 300 per day
• Half are inebriated during working hours
Mean BAC 0.12 conditional on being inebriated
Reported desire to reduce drinking
• 90% of individuals report their lives would be
better if liquor stores closed permanently.
HEALTH APPLICATION II: ALCOHOL CONSUMPTION & PRE-COMMITMENT
Schilbach, F. “Alcohol, Self-Control and Income: A study with rickshaw-pullers in India”. In progress
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Self-control problems or social desirability bias?
Given choices between
Option 1: Financial incentives X to show up
sober
Option 2: Unconditional payments
Preliminary evidence: Demand for Commitment • Large fraction of drinkers (almost 50%)
choose option 1
• They even choose option 1 is X < Y
HIGH DEMAND FOR A COMMITMENT PRODUCT
Schilbach, F. “Alcohol, Self-Control and Income: A study with rickshaw-pullers in India”. In progress
HEALTH APPLICATION III: PLANNING PROMPTS INCREASE FLU SHOT UPTAKE
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Milkman, K., Beshears, J., Choi, J., Laibson, D., & Madrian, B. (2011). “Using Implementation intentions prompts to
enhance influenza vaccination rates.” Proceedings of the National Academy of Sciences, 108(26), 10415-10420
0
5
10
15
20
25
30
35
40
% R
ec
eiv
ing
flu
sh
ot
Visits to single-day clinics
Control
Time Plan
27% increase
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HEALTH APPLICATION IV: MICRO-INCENTIVES INCREASE CHANCES OF LEARNING HIV STATUS
Thornton, R. (2008) "The Demand for, and Impact of, Learning HIV
Status.” AER 98(5): 1829-63
Micro-incentives Induced People to Pick up HIV Test
Results
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0 0.1-0.2 0.3-0.5 0.5-1.0 1.0-1.5 1.5-2.0 2.0-2.5 2.5-3.0
Pe
rce
nta
ge
Le
arn
ing
HIV
Re
sults
Dollars
CAUTIONARY TALE: DIAGNOSIS MATTERS! AUTO-ENROLMENT WORKS WELL TO INCREASE SAVINGS PLAN PARTICIPATION…
Madrian, B. and D. Shea, D. “The Power of Sugges;on: Iner;a in 401(k) Par;cipa;on and Savings Behavior," Quarterly Journal of Economics, 116(4), 1149-‐1187, 2001
0 10 20 30 40 50 60 70 80 90
Opt-‐In Opt-‐Out
Percentage Enrolled in 401(K) Plan
Increased savings from 55% to 85%
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SO HOW ABOUT DEFAULTING PEOPLE INTO SAVING A PART OF THEIR TAX REFUND?
0%
20%
40%
60%
80%
100%
Opt In Opt Out
Effect of Default Settings on Those Saving Tax Refund
Bronchep, E., Dee, T., Huffman, D., Magenheim, E. “When a Nudge isn’t Enough: Defaults and Saving Among Low-‐income Tax Filers,” Na8onal Bureau of Economic Research, Working paper, 2011
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THE PSYCHOLOGY OF SPENDING AND SAVING: THE CASE OF RETIREMENT SAVING
Out of every 100 surveyed employees
3 actually follow through over the next four months
68 self-report saving too little 24 plan to
raise savings rate in next 2 months
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THE PSYCHOLOGY OF SPENDING AND SAVING: THE CASE OF THE EITC REFUND
Difference in psychologies between 401(K) and EITC: – 401(K): 68% wanted to save more – EITC: 75% weren’t planning to save
Out of every 100 surveyed employees
75 had clear plans on ways to spend their refund
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QUESTIONS?
Saugato Da4a Managing Director, ideas42
www.ideas42.org
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