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Economists have long held that the best way to predict human behavior is to assume that people are rational, selfish, and more or

less identical. New research shows that this is not necessarily the case.

The World Development Report 2015 is based on three main ideas: bounds on rationality, which limit individuals’ ability to process

information and lead them to rely on rules of thumb; social interdependence, which leads people to care about other people as well

as the social norms of their communities; and culture, which provides mental models that influence what individuals pay attention

to, perceive, and understand (or misunderstand).

The report has two main goals:

To change the way we think about development problems by integrating knowledge that is now scattered across many

disciplines, including behavioral economics, psychology, sociology, anthropology, neuroscience, and political science.

To help development practitioners use the richer understanding of the human actor that emerges from the behavioral

sciences in program design, implementation, and evaluation.

The central argument of the Reportis that policy design that takes into account psychological and cultural factors will achieve

development goals faster. The main tools — affecting prices through taxes, subsidies, and investments; regulating and legislating;

and providing information — all remain relevant. But once considered from the perspectives of bounded rationality, social norms,

and cultural categories, each tool becomes more complex and more nuanced. Moreover, the standard approach does not include

direct efforts to change social norms or cultural meanings absent the tools of prices, regulation, and information. When people

encounter prices, regulation, and information, their responses are not two-dimensional but often involve a certain psychic depth, a

notion that the standard economic account of human action has long hidden from view. Table 1 lists a series of examples in order

to contrast how nuanced uses of prices, regulation, and information differ from the standard uses, given the same development

objectives (in the table, entries in each row share the same development goal).

Table 1. The standard and enriched policy toolkits

Standard policy toolkit Enriched policy toolkit

PRICES(Prices change the attractiveness of a product along a

two-dimensional demand curve)

Cigarette taxes

Subsidized mosquito nets

General taxes for environmental cleanup

Subsidizing vaccines

PRICES AS ATTRIBUTES(Prices also affect other attributes of a choice, including its

temporal, normative, and symbolic dimensions)

Posted bonds not to smoke (bounded rationality)

Free mosquito nets (bounded rationality)

Small symbolic taxes on plastic bags (social norms)

Giving away lentils at vaccine sites (cultural categories)

REGULATIONS(Regulations and legislation are commands that are

effective when enforced)

REGULATIONS AS DESIGN(Regulations also affect the ease, social quality, and

meaning of choices)

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WDR 2015: Mind and Culture

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About the Report

effective when enforced)

Required forms for tuition assistance

Mandatory employer-sponsored savings plans

Water rationing

Letters that tax payments are overdue

Electoral rules

meaning of choices)

Personalized support with those forms (bounded rationality)

Default enrollment in the savings plan (bounded rationality)

Limiting observable uses of water (social norms)

Letters stating that most people pay taxes (social norms)

Electoral rules with quotas for women (cultural categories)

INFORMATION(Information is factual knowledge)

Nutrition counseling

Financial literacy courses

Automobile miles per gallon

Household energy consumption bills

Messages on clean water to households

Family planning flyers

INFORMATION AS A GUIDE TO ACTION(Information is also about the rules of thumb, emotions, and

meanings that guide action)

Bowls with lines indicating food types (bounded rationality)

Financial rules of thumb (bounded rationality)

Automobile gallons per mile (bounded rationality)

Energy bills benchmarked to neighbors (social norms)

Messages on clean water to communities (social norms)

Telenovelas with small families (cultural categories)

SOCIAL NORMS AND CULTURE

(Social norms and culture shape how we perceive the world,how we feel about the world, and how we act)

Signs asking passengers to protest bad driving (socialnorms)

Peer pressure to support loan repayment (social norms)

Social recognition for work (social norms)

A new term for girls and women who have experienced FGC(cultural categories)

Horizontal, group learning styles rather than lecturing inschool classrooms (cultural categories)

Three examples illustrate the kinds of innovative policy initiatives that the WDR will characterize. First, Community-Led Total

Sanitation (CLTS) interventions in India, Indonesia, and elsewhere encourage community members to make public pledges to each

other that they will eliminate open defecation in their community. Harnessing social norms, the CLTS initiatives make a connection

between defecation and promise-keeping or family honor. Once pledges are introduced, pre-existing values surrounding the

importance of promise-keeping are activated. Open defecation comes to be associated with breaking promises to one’s peers, not

convenience. A recent review confirms that CLTS coverage, scale and effectiveness have taken time, but that overall CLTS progress

appears quite consistent despite the very different contexts in the review countries.

Second, some initiatives that give people new experiences have overcome belief traps, in which people hold negative views of a

practice merely because they have never experienced it. For example, if people have never seen women leaders, they are likely to

be biased against them. If they are biased against them, women are unlikely to run and unlikely to get elected. If they do not get

elected, people will not see women leaders. Policy can open the trap. Political affirmative action for women in West Bengal, India,

led some villages to have female leaders. In villages with women leaders, parents’ aspirations for their daughters increased, girls’

education outcomes improved, and there was less bias against women in politics. Even after the political reservations in a village

ended, women ran for and in many cases won elections. The presence of female political representatives produced another

surprising change: it greatly increased the reporting of crimes against women and police responsiveness to such crimes in India.

Other recent research findings suggest the impact of exposure to new experiences and new concepts to increase social capital

(trust), decrease conflict, and improve health.

Finally, poverty is best understood not only as a state of deprivation but as an environment that affects decision making. The kind of

stress that typically accompanies poverty impairs the cognitive development of children and the quality of decision making of adults.

Thus, one way to help people in poverty is to make it simpler for people to make good decisions—to access clean water, enroll their

Thus, one way to help people in poverty is to make it simpler for people to make good decisions—to access clean water, enroll their

children in school, and open a savings account. Lowering the “cognitive taxes” associated with access to basic services is another

policy idea that the WDR will describe and assess.

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