India needs behavioural eco units today: Cass Sunstein

Sunstein talks about the benefits of behavioural economics and how India can achieve greater public policy outcomes.

If you give people information about how to avoid health risks, they are being nudged, but they aren’t getting any economic benefit.
ET Spotlight
Cass Sunstein is a Harvard University professor and co-author of the book ‘Nudge’ with Nobel prize winner Robert Thaler. Sunstein, who is the founder-director of the programme on behavioural economics and public policy at Harvard Law School, has also served as administrator of the White House Office of Information and Regulatory Affairs and set up the nudge unit with the Obama administration. In an interview to TOI, Sunstein talks about the benefits of behavioural economics and how India can achieve greater public policy outcomes. Excerpts:

How does behavioural economics work?
The basic idea is that sometimes private institutions like hospitals or banks can help people without forcing anyone to do anything. A simple example is a GPS device where people can find their way from one place to another without being threatened or without being promised money. They are just given a sense of how to get where they want to go. If you are a government, sometimes help people with respect to health by giving them information. One example in some countries is calorie labels, which are a nudge — in the sense that people see the caloric content of hamburgers and cheeseburgers and cottage cheese, and if they want to have hamburgers and cheeseburgers they can. But they are nudged to maybe choose lettuce or salad. If you get information from the government about how to reduce the risk of anaemia or how to reduce risks to your child, that is a nudge. If you are automatically involved in a savings plan or some other programme that maybe can reduce poverty or help education opportunity, that’s a nudge.

The beauty of nudges is that they preserve freedom of choice and sometimes they have large beneficial outcomes. One example from my country is that we automatically enrol poor children into free school lunches and breakfast programmes. They don’t have to stay but they are automatically in if their parents want to stay in. The programme at last ensured that 50 million children are enjoying healthy meals to which they are legally entitled. In some nations, approaches of this kind are having very large effects on economic outcomes and health and on safety. The hope is that in this country, which has such creativity and ingenuity, such history of problem-solving, we could easily see India being not one of the world’s leaders but the world’s leader in the use of behavioural science and nudging in the next two or three years. That could easily happen.

Do you think that it is possible to change behaviour of such a large population such as India?
Absolutely. We are seeing the use of nudges and behavioural science in such diverse countries as Singapore, Germany, Denmark, the United Arab Emirates, Saudi Arabia, Qatar, United States, and France. In many of those countries, there are documented, large results already. In India, the Economic Survey, chapter 2 gives us accounts of significant progress with the use of behavioural science already. Stopping open defecation is one, which has been the great achievement of the last 25 years in any country providing toilets for everyone. And while not everyone who has a toilet which is accessible is using the toilet, the numbers are high. One reason that they are high is that behaviour has been changed, not just the technology has been made available, and that can be a result of information, it can be result of ease and it can be a result of using social norms. One thing that I am particularly excited about for India is that there are such strong social norms in place that they are an opportunity to help people find healthier solutions, cleaner solutions, solutions that reduce risks that their children face. That’s an opportunity in sheer magnitude, unexcelled anywhere else in the world, probably unequalled anywhere in the world.

How important is messaging in nudging people to do certain things or change behaviours in such a huge country?
It’s important. I would prefer a term like communication, because messaging sounds a little like selling a product. Communication captures the goal of clarifying to people how they can do something that will make their life better. Many nudges don’t involve communicating. I will give you examples. If you automatically enrol people in programmes, you will very significantly increase participation rates even if they cannot. So shifting from opt-in to opt-out typically increases participation rates by roughly 30%. If you simplify a programme so that participation is easy rather than hard, you significantly use access to the programme. And often programmes that could change people’s lives involve education, they may involve job training, they may involve health. Simplification doesn’t involve communication, it just makes it easier and that can be a huge help. A third example is there are stores all over the world and they are increasing the visibility and salience of healthy choices. Recently in London, a nudge had grocery stores where you can buy whatever you want but the things that are most visible are healthier choices. That significantly increases healthy choices for shoppers and that does not involve messaging or communication. Even so with respect to health challenges, the issue might involve a risk of anaemia, it may involve stunted growth. To clarify to people what steps they should take to reduce the risk is really important, and I would describe that as a communication challenge. In a country which has multiple languages and a large size, the difficulty of course is greater than in a small country. In a country of this size, it is more challenging. But I think the way to think of the size is an opportunity more than an obstacle.

The Economic Survey talks about setting up of behavioural economics units. What would be your advice?
The best thing would be to do it yesterday, and if you can’t do it yesterday, do it today, and if you can’t do it today, do it tonight. Tomorrow is too late. That’s my first bit of advice. My second bit of advice is that your start is probably more important than anything, because of the opportunities. If you charge a certain number of people with using behavioural insights for problems that are so large, there is so much low hanging fruit that the mere fact that people have a mission to do it is likely to produce outcomes in a short time. I would also suggest that whatever entity is created, at least there should be serious consideration to it being directed to produce an annual report that catalogues the results and progress made. That can be a way of nudging the nudgers. And I would suggest that whatever behavioural insights groups are there, have the capacity to work closely with ministries and areas that are important — whether it is health or sanitation or transportation.

Does nudging help in compliance? For example, tax compliance?
That’s one of the great success stories. There are few things you can do to increase tax compliance. The nudge that has been highly successful in many places is to inform delinquent tax payers that most people in their community are paying their taxes. If that’s true, if most people are paying and some people aren’t, to notify the people who aren’t that they are in a minority has been proven effective in reducing tax delinquency. If that doesn’t work, there are other things that can be done, and nudging is like a 12-year-old child. Meaning, it’s developed — we have seen some successes. Maybe there is some good cricket play from the 12-year-old, but a teenager yet. For tax compliance, we have seen successes. I have a hunch that to give people clarity, that to obey the law with respect to taxes is a way of being a good citizen and being loyal to your country and to your deepest convictions — that can be very helpful.

In places where tax delinquency is pervasive, it’s usually the people being nudged by a norm. If you keep your money and don’t give it to the government, problems like persistent poverty, poor health, safety risks are going to be harder to handle. To see that not paying your taxes is a way of failing to help with those problems, that can trigger people’s conscience and that is partly a communications problem. It’s partly a helping to construct the best possible norm.

Do you think incentives can play a role in nudging people to do certain things?
Nudges technically are defined as different from incentives. If you give people information about how to avoid health risks, they are being nudged, but they aren’t getting any economic benefit. If they do the thing that is risky, they are not getting an economic penalty. An economic incentive would typically mean some money if people do one thing or money being taken away if you do it the other way. The simplicity of nudge is like a GPS device, or a warning.

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